Speaking about effective and truly analytical forex tools that can significantly increase the activity of the trader at the exit. So, speaking of efficiency, it is worth considering such an indicator as OsMA.
This analysis tool is a very unusual solution: its approach is very unordinary since it can recognize both «bullish» and «bearish» divergences, namely, the differences in the directions of the course and the oscillator itself.
This means of technical analysis includes a valuable set of qualities.
At this stage of market development, and forex trading, in particular, this tool is very popular among exchange players.
This rating is because this technical tool is very similar to MACD - a well-known dynamic tool that has been very popular among forex traders for a long time.
But, despite the similarity of the two indicators, OSMA has a number of its features and characteristics that allow the expert to recommend it in a variety of market situations for analysis.
Let's talk more about the principle of its operation, settings, and functionality.
In the original language, this indicator sounds like the Moving Average of the Oscillator, which in translation means «moving average of the oscillator».
Like other tools for technical analysis, it functions to prevent (anticipate) and is calculated as the difference between the output of the MACD oscillator and its signal line.
The results on the chart are presented in the form of columns - columns that grow relative to the zero lines or, on the contrary, fall.
Also, we emphasize that:
- the greater the distance between the MACD and the signal line, the longer the length of the bar;
- If the distance is very small, then the column will be short enough.
From this follows one important logical conclusion:
Based on the analysis of OsMA readings, one can speak about the intensity level of the prevailing trend.
If the values on the MACD are identical (coincide), then the graph will not show anything.
As for the basic options (settings) of the Moving Average Oscillator, the leading values that are assumed by this technical tool are 4:
1) slow EMA. It is nothing more than an exponential variant of the moving average, which has a relatively high period (equal to the default of 26);
2) fast EMA: in this situation, the same average (sliding) is demonstrated, but the period is already significantly reduced -12.
The MACD parameter is calculated as a difference: between two averages - fast and slow lines;
3) MACD SMA.
This value is a Simple Moving Average of the signal line, and it is designed to smooth the graph.
A distinctive feature is a small period, by default equal to 9;
4) Price type.
Almost any initial parameters can be used.
As a rule, market players prefer to choose quotes for closing candles (bars), although other values are also frequent - opening prices, minimum/maximum, or average values.
Practical experience shows that modern developments of oscillators act as determinants: they point us to a divergence.
OsMA also confirms this rule: the analysis tool allows the trader to recognize the trade signal in question.
The most significant are the following points:
1) when only a bearish trend is oriented toward sales, the quotation on the chart shows us growth.
But some peaks very confidently took the opposite direction.
2) for the most part such cases, it is worthwhile focusing on the oscillator readings.
This means only that soon the price will fall, and hence, the asset should be disposed of almost immediately;
3) when there is a bullish trend, then everything is identical, only the opposite: the movement of the graphs will be the opposite for the example given above.
Applying this tool in trade and analysis, it is unequivocally to consider that it is very much interconnected with MACD (as it was said earlier).
If we talk about using the moving average, it is worth considering two options - for purchase and sale.
Prospects of the trend - strengthening or weakening show us the bars (their behavior).
It is also worth mentioning that the use of this technical tool implies the possibility of false signals.
Therefore, to improve efficiency, experts recommend using other indicators that allow us to find favorable entry points.
- the divergence is determined in time, or rather its moments;
- a simple and logical display of the equilibrium between the trades (bull and bear);
- the ability to effectively use this tool in conjunction with MACD.