E-Mini Trading With Oscillators and Indicators
E-Mini Trading With Oscillators and Indicators
When discussing trading oscillators in relation to e-mini trading, there is certainly no shortage of opinions as to how well they perform. To be sure, there are traders who rely solely upon the information derived from trading oscillators to enter and exit trades. On the other end of the spectrum, some traders abstain from using oscillators in any form. In my opinion, the best results are derived from using a combination of trading oscillators and chart reading. In this short article, we will discuss various types of oscillators and how they function.
In its basic form, and trading oscillator is a set of data points derived by using an algorithm or formula to a dataset of prior market prices. Like any formula or algorithm, the variables (or input data) can take several forms, especially when it comes to trading. Some formulas use the opening price, others use the closing price, and still others use the range of a given series set of bars. It is not unusual for individual traders to have preferences as to which variable they believe yields are the truest reading for setups they prefer.
While trading oscillators are broken down into several different categories, for the sake of discussion we will classify oscillators as leading indicators and lagging indicators. Even this classification is a topic of debate because all oscillators use earlier data to produce a given data points. I could easily argue that all oscillators are lagging indicators because they use historical data, even if the data is only seconds old. On the other hand, I am not in the majority position on this issue so we will stay with mainstream thought on trading oscillators.
Leading Trading Oscillators
Proponents of leading indicators claim that these trading oscillators are able to lead price action. These trading oscillators are generally referred to as momentum indicators. Most momentum indicators utilize the rate of change (ROC) of a given security or index. For our discussions, we will be referring to futures indexes. As the name implies, the faster a security increases/decreases in price will cause momentum to increase up or down. Some well-known momentum, or ROC indicators are:
Commodity Channel Index
Momentum Indicator
Relative Strength Indicator
Stochastic Indicator
While these oscillators calculate rate of change with different methodologies, they all fall into the category of momentum indicators. By definition, momentum indicators seek to precede actual price action. In my trading, I have found the Commodity Channel Index to be an effective trading oscillator and I utilize it often. There are times when I have used all of these indicators, depending upon market conditions. Leading indicators are especially effective in range bound markets.
Lagging Trading Oscillators
Lagging indicators fall under the classification as trend following indicators or oscillators. These trading oscillators seldom lead the price of the futures contract or security. For obvious reasons, these oscillators/indicators are of most use when the market is in a trending mode. As a note of caution, using lagging indicators in a non-trending market will lead to many false indications because of the lag time that is inherent in lagging indicator/oscillator calculation. Some very popular lagging indicators are:
Moving Averages (exponential, simple, or weighted)
MACD
Once you have entered a trend, lagging indicators are useful in keeping you in that trend. It is relatively easy to see the trend weaken as the moving average begins to flatten. As this flattening begins, most traders began considering their exit strategy.
In summary, we have talked about trading oscillators and indicators and their application. In range bound markets, leading indicators are especially effective while lagging indicators will create many false entries and exits. On the other hand, lagging indicators are especially effective in trending markets and can assist a trader in gauging the strength and longevity of a trend he or she is following. In short, trading oscillators have a variety of uses and applying the correct oscillator to given market conditions may help the trader be more profitable. The Sonic Producer Free Demo-The Sonic Producer Rapidshare Because Trading Is The Thing We Do BEST Underwater – Is Strategic Default the only way out! After Hours Trading Work Convenience of Online Retailers Online children's clothes retailer excels in customer satisfaction How To Use The Best Technical Indicators For Day Trading The Phrases Which Are to Be Avoided While Merchant Trading of Crude Oil Eat Stop Eat Results - Eat Stop Eat Rapidshare Commodity Trading Create a Valuable HRD With Strategic HR Prostores Makes Starting an On the internet Retailer Straightforward You're Personal Burberry Outlet Below Wholesale