A 3 in 1 oscillator indicator to find reversal points
An oscillator is a type of technical indicator that fluctuates above and below a central line or between defined upper and lower boundaries.
Oscillators are used to identify overbought or oversold conditions in the market, gauge the strength of a trend, and signal potential trend reversals. They are particularly valuable for short-term traders and are commonly employed in various financial markets, including stocks, forex, and commodities.
Market analysts have come up with different oscillating indicators. When you use a mix of these indicators, it makes your trading signals more reliable. If these oscillators all show the same signal direction, it gives you more confidence in that signal.
But what if you could make things simpler, clean up your charts, and still have the benefit of multiple tools confirming the same direction?
Before we get into that, let's look at some common oscillating indicators traders use.
✤ Money Flow Index (MFI)
The Money Flow Index (MFI) is a technical indicator used in financial analysis to measure the strength and direction of money flowing into or out of a financial instrument, such as a stock or a market index. It is often used to identify potential reversal points in the price of an asset.
The Money Flow Index is calculated using both price and volume data. The MFI value ranges from 0 to 100.
✅ An MFI value above 80 suggests a strong inflow of money into the asset, potentially indicating an overbought condition and a possible reversal to the downside.
✅ Conversely, an MFI value below 20 suggests a strong outflow of money, indicating an oversold condition and a potential reversal to the upside.
You can explore Superior MFI, an advanced version of the conventional Money Flow Index indicator.
✤ Relative Strength Index (RSI)
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. It is a widely used technical indicator in financial markets, particularly in stocks, forex, and commodities trading. The RSI is used to identify overbought or oversold conditions in an asset, helping you make informed decisions about potential trend reversals.
The RSI is calculated based on the average gain and average loss over a specified period, typically 14 periods. The resulting RSI values range from 0 to 100. Traditionally, the RSI is interpreted as follows:
✅ RSI values above 70: The asset is considered overbought, suggesting that it may be due for a price correction or reversal to the downside.
✅ RSI values below 30: The asset is considered oversold, indicating that it may be due for a price correction or reversal to the upside.
Take a look at Superior RSI—a more sophisticated adaptation of the standard Relative Strength Index indicator.
Stochastic refers to the Stochastic Oscillator, a momentum indicator widely used in technical analysis to identify overbought or oversold conditions in financial markets. It helps you assess the strength and potential reversal points of a price trend. The Stochastic Oscillator compares the closing price of an asset to its price range over a specified period. The typical setting involves a 14-period time frame.
The resulting Stochastic Oscillator values range from 0 to 100. The interpretation of these values is as follows:
✅ %K above 80: The asset is considered overbought, suggesting a potential reversal to the downside.
✅ %K below 20: The asset is considered oversold, indicating a potential reversal to the upside.
Discover Superior MFI, a refined version of the conventional Money Flow Index indicator.
✤ Multi-Osc OB/OS Overlap
Returning to our earlier solution, we introduce the Multi-Osc OB/OS Overlap — an indicator designed to simplify your strategy by replacing the need for three separate indicators.
This unique tool seamlessly combines the primary trading oscillators — Money Flow Index (MFI), Relative Strength Index (RSI), and Stochastic — providing a simplified and efficient approach. Multi-Osc OB/OS Overlap simplifies the interpretation of MFI, RSI, and Stochastic by using color-coded lines on the sub-panel: green indicates oversold conditions, pink signals overbought conditions, and grey denotes a neutral state.
When all 3 indicators overlap in their overbought or oversold areas, Multi-Osc OB/OS Overlap visually highlights these zones on the chart. This visual cue is instrumental in identifying potential reversal signals, especially at the occurrence of reversal candles following the conclusion of these overlapped areas.
Oscillator indicators effectively gauge direction and momentum in asset prices, but relying on a single oscillator for market entries can be unreliable. Multi-Osc OB/OS Overlap provides a balanced and comprehensive alternative, aiding traders in making informed decisions by considering various aspects of market dynamics.