Moving Average of Oscillator (OsMA)

The Moving Average of Oscillator (OsMA) is a useful tool that helps traders understand the strength behind price movements. It builds on the classic MACD indicator by smoothing out its signals, making it easier to spot trends and potential reversals. OsMA shows the difference between the MACD line and its moving average, giving you a clearer picture of market momentum.

Remember, I warned you that MACD is one of the most important indicators in trading? So, OsMA takes the MACD line and subtracts the signal line (which is a moving average of the MACD).

This difference is plotted as a histogram, which helps you see how the momentum is changing. When the OsMA is above zero, it indicates bullish momentum, meaning buyers are in control. When it's below zero, it signals bearish momentum, meaning sellers are taking charge.

Formula:

mathematicaCopy codeOsMA = MACD Line - Signal Line

How to Read OsMA

  • Positive Values. When OsMA is above zero, it shows that the MACD line is above the signal line, suggesting bullish momentum.

  • Negative Values. When OsMA is below zero, the MACD line is below the signal line, indicating bearish momentum.

  • Crossing Zero. When OsMA crosses from below to above zero, it’s a potential buy signal. Conversely, crossing from above to below zero can be a sell signal.

  • Histogram Peaks. Tall bars in the histogram show strong momentum, while smaller bars indicate weakening momentum.

Using OsMA in Trading

  1. Spotting Trends:

    • Bullish Trend. Look for OsMA to stay above zero with rising histogram bars.

    • Bearish Trend. Look for OsMA to stay below zero with falling histogram bars.

  2. Identifying Reversals:

    • Buy Signal. When OsMA crosses above zero, especially if it follows a period of bearish momentum.

    • Sell Signal. When OsMA crosses below zero, especially after a bullish trend.

Practice Exercise

Let’s get hands-on with OsMA.

Objective: Use the OsMA Indicator to identify buy and sell signals on a real asset.

Scenario: Trading crypto (BTC/ETH) on a 4-Hour Chart. Or, you can choose other assets.

  1. Set Up the Indicator:

    • Open your trading platform.

    • Add the OsMA indicator to your chart. It usually appears as a histogram below your price chart.

  2. Identify Signals:

    • Watch for when the OsMA histogram crosses the zero line.

    • Look for increasing or decreasing bars to gauge the strength of the trend.

  3. Make Demo Trades:

    • Use OsMA signals to enter and exit trades on a demo account.

    • For example, buy when OsMA crosses above zero and sell when it crosses below.

  4. Analyze Your Trades:

    • Track how often OsMA signals lead to profitable trades.

    • Adjust your strategy based on what you observe. Maybe pair OsMA with another indicator for better results.

This is an important indicator to learn.

PreviousMoving Average Convergence Divergence (MACD)NextAlligator Indicators

Last updated