Oscillators

Oscillator or oscillating simply means that a line oscillates back and forth between an upper and lower limit.

Due to this definition, oscillators are always almost identical in appearance and interpretation, regardless of the underlying calculation of the indicator.

Oscillators usually have a center line that divides the display into two equal areas. Depending on which scale you choose for the indicator, this line is at 0 or 50, sometimes even at 100%. However, this is not so important for the interpretation.

If the indicator value reaches or approaches the upper or lower barrier, this is referred to as an extreme situation, as the price must then move in the other direction again in the future. If the indicator is in such an extreme situation, it is intended to indicate an exaggeration in the underlying price trend. If the indicator is in the upper range, it is usually an exaggeration to the upside, the market is "overbought", if it is in the lower range, prices have fallen too quickly, the market is "oversold".

In sideways movements with rapid successive up and down phases, this indicator concept works, but in trend markets it fails, as the indicator "sticks" to the upper or lower limit for a long time, especially in the case of strong and clear trends, before it can break free again.