No.3 Fun Fact FX Column: About the difference between indicators and oscillators

Do you know the difference between indicators and oscillators?

Let me compare it to a car.

An indicator shows where the car is located.

It mainly indicates positional information.

For example, suppose you drive and climb a mountain.

Since this is just an analogy, assume it takes many days to drive and climb the mountain.

It represents an average value of how much could be climbed over a certain number of days on average.

This is the moving average line.

If you keep climbing without rest,

the 5-day average

and the 13-day average

the 5-day average will be much higher.

However, if you take a break for 2–3 days in the middle, the 5-day average will drop.

If you rest, the 5-day average decreases.

This is what causes a moving average cross to occur.

That's roughly what indicators are like.

Now, what is an oscillator?

If you compare it to a car, it is like engine RPM or energy output.

It measures such things.

For example, suppose the car is a hybrid.

Essentially, you need to fuel the engine to move forward, but

to a certain extent you can run on surplus electric power, or even move forward with momentum without pressing the accelerator.

That kind of movement occurs.

Therefore, judging the market movement only by indicators is very dangerous,

A car that was driving up a mountain might reach a very high point and think, “If I keep climbing like this, I’ll reach the rest as well,” but in reality the gasoline may be depleted and engine power may have dropped. If you know these internal factors, you would then anticipate a decline and be cautious of a downward move. In FX technical analysis, being able to make judgments using oscillators is a tremendous advantage. There are many things you can’t understand by price movement alone. That’s why, when I teach FX trading to various people, I place special emphasis on how to use and interpret oscillators.

On how to use MACD

“Buy on a golden cross and sell on a dead cross”

…Many people explain it this way, but that is interpreting the oscillator MACD as if it were an indicator. This is not truly the correct way to use MACD.

I would like to focus on less well-known ways to use oscillators and explain them.

HyumuFX