Exploring Indicators. Part Four

Centerline Crossovers (crossing the center line)

As the name suggests, the signals crossing the center line are used, mainly in the central oscillators that fluctuate above and below the center line. Traders are aware that the intersections of the center line with RSI divergence and increases the reliability of the signal values supplied pereprodannosti or perekuplennosti. However, the majority of the limited oscillators such as RSI and Stochastics, rely on the divergence and levels pereprodannosti / perekuplennosti for the alarms. The average rate is not limited to the main oscillator and the better to leave it for other instruments. For our purposes of analysis, cross the center line will be the central oscillators, such as cash flow Chaikin, MACD and Norma change (ROC).

Crossing the center line is sometimes interpreted as a signal to buy or sell. Buy signal occurs when crossing the center line up, but sales down during the crossing. For the ROC and MACD crossing up or down from zero to act as a signal.

Movement above or below the central line shows that the dynamic has changed, or from positive to negative or from negative to positive. If the central dynamic oscillator has risen above its center line, the dynamics changed in a positive and can be considered as a Bull. If the central dynamic oscillator fallen below its central line, the dynamics changed in the negative could be viewed as a bear.


The graph at Intel MACD and ROC has filed several signals crossing the center line. A pair of distinct signals, but also was full of false signals or fast turn. This reveals some problems related to the sale by the signals of oscillators. Also, it stresses the importance of the connection of different signals to obtain a more reliable signal of buying and selling. Some traders also criticized the signals crossing the center line because of their delay and loss of a large part of the movement.

Perecechenie central line can also act as a confirming signal to improve the reliability of the previous signal or reinforce suschestvuyuschegotrenda. If there was a positive divergence and byche crossing of moving averages, according to the following increase above the center line of the previous signal is confirmed to buy. The failure of the oscillator to move above the central line could be interpreted as a confirmation and do not act as a warning that something is wrong.


The graph at Intel MACD crossing the center line acts as a signal to the third in a series of bull signals. Even after the third alarm Intel still leave a sufficient portion of the upward movement.
Formed a higher low, which indicate a potential positive divergence.
It was byche crossing of moving averages, which confirmed the positive divergence. And finally, it was byche crossing the center line. Some traders worry that miss too much of the traffic when waiting for the third and final confirmation. However, this may be a more reliable signal and help to avoid rapid ilozhnyh turn signals. It is true that the expectation of the third signal reduces profit, but it may also help reduce the risk. Cash flow Chaikin is an example of a central oscillator, which is important when crossing up and down the center line. Divergence levels perekuplennosti and pereprodannosti are secondary to the absolute level of the indicator. The direction of motion of the oscillator is important, but should be considered in the context of the absolute level. The longer the oscillator is above zero, the greater the accumulation. The longer the oscillator is below zero, the stronger distribution. Therefore, Cash flow Chaikin bovine considered when the oscillator is trading above zero and bear when traded below zero. Graph IBM Cash flow Chaikin began to unfold down in July. At this time action is decreased along with the market and reducing the oscillator was normal. However, in the second half of August the campaign started to grow, while the oscillator is not able to continue to increase along with the action and upalnizhe zero. While the event is raised further, Chaikin money flow continued to decline. This was the signal that something is wrong.

Alerts oscillators - Conclusion
Limited oscillators are best used to identify states perekuplennosti and pereprodannosti. However, perekuplennost does not mean a signal to sell, and pereprodannost does not signal a buy. Status perekuplennosti pereprodannosti and serve warning that the state had reached extreme levels and should be paid close attention to the price activity and other indicators.

To improve the reliability of signal oscillators, traders can monitor many signals. Criterion signal buy or sell would depend on three separate, but supporting each other's signals. Alert purchases may be made pereprodannosti testimony, a positive divergence and bovine crossing moving averages. In contrast, sales of the signal can be given a negative divergence, bear crossing of moving averages and bear crossing the center line.


The traditional analysis of graphical models can also be applied to the oscillator. This is slightly misleading, but it may help to determine because of the movement of oscillators. Monitoring of the higher maximums and lower minimums can help confirm the previous analysis. Violation of the trend line may indicate that there is a risk of change in the direction of momentum.

Danger traded on the oscillator signal to the main trend in the market. When bull trend to seek better opportunities through the purchase signals pereprodannosti, positive divergence, bull crossing moving averages and the suppression of bovine central line. When you bear trend is best to look for opportunities to sell through the signals perekuplennosti, negative divergence, bear crossing moving averages and bear crossing the center line.

And finally, oscillators are most effective when used in conjunction with the analysis models, the definition of support / resistance, the definition of trend and other tools of technical analysis. Obtain an overall picture can be viewed in the context of signal oscillators. It is important to determine the current trend or even to ascertain whether any securities in the trend. Indications and signs of oscillators may have different meanings under different circumstances. If you use other methods of analysis in conjunction with the testimony of the oscillators, the chances of success greatly increase.

Arthur Hill
www.stockcharts.com