|
Statistics
Total online: 1 Guests: 1 Users: 0
|
Trade
Chaikin oscillator indicator - description and options strategies
The Chaikin oscillator is a hybrid indicator calculated taking into account market prices and trading volumes. It is not difficult to guess from the name, came up with this algorithm Marc Chaikin, a well known trader in the West, who early in his career was interested in the writings of Granville and Larry Williams.
Unlike many other indicators, based on long-known statistical formulas, the Chaikin oscillator gives a numeric form relatively fresh market theory about the accumulation and distribution of volumes, which relies on three key assumptions.
Premise No. 1 – If the day closes above the middle of the intraday range on the market was the accumulation, and in the opposite case, if the trading price closed below the middle of the traded region, it is possible to speak about the topic.
Premise number 2 – the Growth rates in the period of accumulation is always maintained a rapid growth, so if the bull market started falling volumes, it is necessary to prepare the reversal.
The situation in a bear market is treated a little differently – at the beginning of the distribution there are low volume that gradually increases. This is due to the fact that large players gradually fix the previously open long positions, that is, not in a hurry to provoke other participants of the market on aggressive sales. After reversal of the trend becomes apparent, the volumes begin to rise and reach its peak at the very bottom of the price.
Premise # 3 – Chaikin Oscillator in a clear mathematical form shows the dynamics of the inflow and outflow of money into the market, as the price and trading volume are used together to estimate the inflow and outflow of capital for the selected asset.
The basis for the calculation of the indicator is another well-known algorithm Mark, which is called Accumulation/Distribution (accumulation/distribution). The following figure shows an example of the markup of the Chaikin oscillator and its formula is:
Looks like the Chaikin oscillator
As you can see, CHO is nothing but the difference between two exponential average of the AD values, calculated for different periods. Default moving averages are based on three and ten days, but, given the characteristics of the selected timeframe and the specific currency pair, setup can be optimized in its sole discretion.
The Chaikin oscillator signals
The Chaikin's algorithm has found application in diverse strategies, for example, I counted five types of signals that can be obtained by marking this indicator, and the first of these is divergence.
A bullish divergence is a situation where the Chaikin's oscillator can't update the last low, and the price broke through the newly formed "bottom":
An example of a bullish divergence, with the Chaikin indicator
Bearish divergence is formed on a similar principle, but instead of the minima is taken into account the sequence of peaks:
Little bear divergence oscillator Chaikin
Thus, the appearance of a bullish "diver" is the first sign of weakness bears and bearish divergence that is observed between the dynamics of the Chaikin oscillator and the price indicates a lack of power among buyers.
Oscillators in Forex - an overview of the most popular oscillators foreign exchange market.
The second type of signals provides for the analysis of dynamics of values of the oscillator on the daily chart with respect to the direction of the SMA(90):
The Chaikin oscillator in Forex
In this case, the rules of the transactions are as follows:
If the current price is located above the SMA(90), and the line of the Chaikin oscillator is below the zero line and turns up – the likelihood of increased prices increases.
If the current price is located below the SMA(90), and the indicator line is above zero and turns downwards – increases the probability of reducing prices.
The third strategy is based on the concept of overbought/oversold, that is, to search for signals first need to be placed on the Chaikin oscillator, the range in which the indicator line is 80-90% of the time, for example:
Zone oscillator Chaikin
We get two horizontal lines that represent the overbought and oversold. When the indicator value reaches one of these critical levels, buy and sell the asset in the calculation of the return rates to "normal" range:
Chaikin's indicator signals
The following strategy (the fourth) involves the conclusion of transactions at the moment when the base line of the Chaikin oscillator crosses its average value calculated over a certain period:
The oscillator and its signals - a widely recognized
In the standard version of the author's indicator this signal line is missing, so it will have to manually add trailers" to the markup of the oscillator is the Moving Average tool with the parameter "apply to: Previous Indicator's Data":
The settings of the Chaikin indicator
And the fifth strategy is focused on finding the medium-term trends. In principle, this approach is no different from similar systems on CCI or MACD, as the signals are interpreted according to the following rules:
if the Chaikin oscillator is calculated over a long period that is above zero, the market has formed bullish trend;
if the indicator values are below the zero – current downtrend.
bridging the indicator line with its zero mark indicates the turnaround.
The original oscillator Chaikin
It turns out that if you combine all these signals on different time frames, you can create a complete trading system solely on the oscillator Marc Chaikin. The only drawback of this indicator is that in Forex it is impossible to calculate the real volume, so the formula we have to use tick data, the dynamics of which sometimes is very different from the real volume.
|
| Category: Forex | Added by: (05.11.2017)
|
| Views: 435
| Rating: 0.0/0 |
|
