I'm carrying this post over from the blog I kept under a different URL, for the sake of posterity.
I've been using the Klinger Oscillator lately and find it to be very helpful. This oscillator is a construct of volume and is used to determine whether it (volume) is confirming price changes. I just haven't been satisfied trying to read volume bars, OBV, or up/down volume so I trolled through the Tradestation forums and dug this out.
The variables involved in constructing this indicator are Klinger's volume Oscillator with ATR (Average True Range).
The Klinger Oscillator (KO) is intended to show when price changes are confirmed by volume. The computation comes from three types of data:
- the high-low price range (movement)
- volume (force)
- Accumulation/Distribution; where Accumulation is when the sum of the bar's high+low+close is greater than the previous bar. While Distribution is when that sum is less than the previous bar. When the sums are equal the existing trend is maintained.
Volume force is converted into an oscillator that represents the difference between a 34- & 55-period exponential moving average and uses a 13-period trigger.
From what I have read, the KO works well when going with the trend, but not as effective going against it. While it is most useful with price action divergences; especially on new highs/lows in overbought/oversold territory.
So, on the short time-frame (5-min. chart) I'm using an 100-EMA to determine our trend. If price is greater than the 100-EMA the trend is up, vice versa when price is below. If the trend is up you look for the KO to dip deep under the zero line and a cross of the trigger would be a buy signal. If the trend is down, look for the KO to rise up above the zero-line and a crossing of the trigger is a short signal.
This particular oscillator also incorporates an Average True Range length to help in smoothing.
Here are two examples I pulled from price activity in AAPL & FSLR.and more recently from SPY on wednesday April 22
The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it as a way to alert me to an existing condition of price. The key concept to take away from this blog is that I try to anticipate what will happen on the higher time frame by using a faster time frame to trigger the trade setup. I do not trade a "system" I use two indicators to clue me in to price conditions. Please read the Disclaimer located in the sidebar of this site. I can be contacted via email at email@example.com
I am always open to questions, comments, or suggestions on how to improve this blog.