Moving Average of Oscillator indicator
According to statistics, Moving Average of Oscillator accounts for only 9 requests per month, while OsMA is searched for by more than 2.3 thousand people. It is under this abbreviation that it is known to most traders, but it is among the basic Metatrader tools under a less well-known name. In some sources OsMA is called not very popular due to its similarity to MACD. Nevertheless, in the screenshot below you will see that with the same input parameters, they show different results, which are interpreted differently. Although there are some similarities.
Trading the Moving Average of Oscillator
Moving Average of Oscillator is a classic indicator related to the number of oscillators. It is designed to find divergences of “bulls” and “bears” (discrepancies between price and indicator readings). It is placed below the price chart and is a histogram.
This is a comparison of OsMA with MACD. There is also a significant difference. The formula of the Moving Average of Oscillator indicator is the difference between the MACD and its signal line. An increase in the distance between them is expressed in an increase in the length of the OsMA columns.
Settings Moving Average of Oscillator:
- Slow and Fast MA. The periods of fast and slow exponential MA are set here. It is undesirable to make a very large spread between them, but for each pair these parameters will be different.
- MACD SMA. Simple MA of MACD values (signal line). This is a parameter for smoothing the histogram, the period is usually set here small.
- Price type. By default, the calculation is based on the closing prices of the candles, but you can experiment with this parameter.
A signal that it will soon be necessary to open a long position appears when the Moving Average of Oscillator crosses the zero level upwards. If the upward trend continues, then this can be interpreted as an increase in the strength of the trend. The deal is closed when the histogram bars begin to gradually decrease. The signal to open a short position is assessed in a similar way, but in a mirror image.
Several recommendations for the indicator:
- The optimal OsMA timeframe is from М30 and above. On smaller timeframes, price noise interferes with trend movement. This is reflected in the frequent change in the length of the histogram bars.
- Trading during news releases is discouraged.
- The indicator is optimal only for currency pairs. It is better not to use it on metals and securities / indices.
Unfortunately, the Moving Average of Oscillator gives relatively many false signals. However, like the MACD. There is also a need to constantly adjust the indicator parameters, adjusting them to changes in volatility. OsMA can be used as an additional instrument confirming the signal or to navigate by it when there is doubt about the accuracy of the signal by other indicators.
Output… The Moving Average of Oscillator is an auxiliary oscillator that is mostly outdated, but can still be useful. It is designed for calm markets with a moderate degree of volatility. For novice traders who are not yet fully familiar with the terminology, it may seem complicated and incomprehensible. Therefore, we recommend it only as a simulator on a demo account and as a tool for learning how to select parameters in accordance with the current market situation.