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M-Oscillator
Based on the research of Mohamed Fawzy, MFTA, CFTe and published in the IFTA Journal 2018.
The M-Oscillator is a bounded oscillator that moves between (-14) and (+14), it gives early buy/sell signals, spots divergences, displays overbought/oversold levels, and provides re-entry points, and it also work as a trend identifier.
Trading tactics
Overbought/Oversold:
We define the overbought area as anywhere above the 10 level. The oversold area is below -10. When the M-Oscillator goes above 10 (overbought) and then re-crosses it to the downside, a sell signal is triggered. When the M-Oscillator surpasses -10 to the downside and then re-crosses back above this level, a buy signal is triggered. This tactic is only successful during sideways markets; during an uptrend, the oscillator will remain in its overbought territory for long period of times. During a downtrend, it will remain in oversold for a long time.
Overbought/Oversold rule:
• Buy when the M-Oscillator violates the (-10) level to the downside and crosses back to the upside.
• Sell when the M-Oscillator crosses above the (+10) level and crosses back to the downside.
Divergence
Divergence is one of the most striking features of the M-Oscillator. It is a very important aspect of technical analysis that enhances trading tactics enormously; it shows hidden weakness or strength in the market, which is not apparent in the price action. A positive divergence occurs when the price is declining and makes a lower low, while M-Oscillator witnesses a higher low. A negative divergence occurs when the price is rising and makes a higher High, while the M-Oscillator makes a lower high, which indicates hidden weakness in the market. Divergences are very important as they give us early hints of trend reversal (weekly chart)
Divergence rule:
• Buy when the M-Oscillator witnesses a positive divergence with prices followed by a rise above (-10).
• Sell when the M-Oscillator witnesses a negative divergence with prices followed by a decline below (+10).
The M-Oscillator is a bounded oscillator that moves between (-14) and (+14), it gives early buy/sell signals, spots divergences, displays overbought/oversold levels, and provides re-entry points, and it also work as a trend identifier.
Trading tactics
Overbought/Oversold:
We define the overbought area as anywhere above the 10 level. The oversold area is below -10. When the M-Oscillator goes above 10 (overbought) and then re-crosses it to the downside, a sell signal is triggered. When the M-Oscillator surpasses -10 to the downside and then re-crosses back above this level, a buy signal is triggered. This tactic is only successful during sideways markets; during an uptrend, the oscillator will remain in its overbought territory for long period of times. During a downtrend, it will remain in oversold for a long time.
Overbought/Oversold rule:
• Buy when the M-Oscillator violates the (-10) level to the downside and crosses back to the upside.
• Sell when the M-Oscillator crosses above the (+10) level and crosses back to the downside.
Divergence
Divergence is one of the most striking features of the M-Oscillator. It is a very important aspect of technical analysis that enhances trading tactics enormously; it shows hidden weakness or strength in the market, which is not apparent in the price action. A positive divergence occurs when the price is declining and makes a lower low, while M-Oscillator witnesses a higher low. A negative divergence occurs when the price is rising and makes a higher High, while the M-Oscillator makes a lower high, which indicates hidden weakness in the market. Divergences are very important as they give us early hints of trend reversal (weekly chart)
Divergence rule:
• Buy when the M-Oscillator witnesses a positive divergence with prices followed by a rise above (-10).
• Sell when the M-Oscillator witnesses a negative divergence with prices followed by a decline below (+10).
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