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# Oscillator - Moving Average (OsMA)

OsMA Oscillator (Oscillator - Moving Average) is a technical indicator, which shows the difference between the MACD line and SIGNAL line. The indicator is measured as follows:

### OsMA = MACD – SIGNAL

We remember that:

### SIGNAL = SMA(MACD, N)

Where:

EMA - exponential moving average;

SMA — simple moving average;

SIGNAL — smoothing moving line, signal line of the indicator;

N — number of calculation periods;

P – the current price (Close, Open, High, Low, Median Price, Typical Price).

The difference that we have obtained, is drawn on a bar chart (subsequent rectangular bars) from zero up or down. If MACD is above the signal line, OsMA values will also be positive, if MACD is below the signal line, its values are negative. Accordingly the increase in difference between MACD and signal line will also make OsMA values grow. This is the signal of the strengthening of the tendency. If the difference will start decreasing, OsMA values will also fall down, and the tendency will lose its strength. Upon crossing of the signal line by MACD, OsMA will be equal to 0. Essentially, the oscillator shows how the balance of the market forces changes.

Let's consider the example how the Moving Average Oscillator works. We use the standard parameters (12,26,9).

The signal for buying: ОsMA crosses 0 from bottom to top (MACD> SIGNAL)

Zone 1. The distance between MACD and SIGNAL grows, OsMA values grow. Buyers get stronger, ascending tendency gets stronger.

Zone 2. The distance between MACD and SIGNAL decreases, OsMA starts falling down. Buyers get weaker, tendency slows down, it is the right time to think about stopping buying.

The signal for sale: ОsMA crosses 0 from top to bottom (MACD<SIGNAL)

Zone 3.The distance between MACD and SIGNAL grows, OsMA grows negatively. Sellers caught balance in their hands and push the price down, the descending tendency gets stronger.

Zone 4. The distance between MACD and SIGNAL decreases, OsMA gets less and less. The tendency slows down, sellers start giving up, it is the right time to stop sales.

To reduce false signals, it is recommended to define the market trend beforehand. It can be done with the help of other indicators (for example, ADX, MACD etc.) and with the help of other proven methods. Under a bullish trend, crossing of line from top to bottom in most part of cases indicates the beginning of the correction. it is not recommended to sell against trend. When it becomes weaker (OsMA bars start approaching to 0) you should search signals for buying before crossing. This allows finding more profitable entrance points. Under a bearish trend everything is quite the opposite.

Divergences and convergence of OsMA

As many other indicators of technical analysis, OsMA is rather good in showing bullish divergence and bearish convergence, which allow catching moments of retracement or reversal at an earlier stage.

## Conclusion

The Moving Average Oscillator can be called a direct relative of MACD with all that it implies. Benefits include a clear rendering of bull-bear balance at the current time period, pretty good signals under divergence/convergence. Drawbacks include a lot of false signals under lower time frame, and bad performance of this indicator in the role of overbought/oversold figure.

It helps to remember that there are not ideal settings for any of the indicators, therefore, you always can experiment with settings and find the most suitable for yourself.

You also may be interested in:

Forex MACD Indicator

How to use DeMarker Indicator

What Directional Moving Index is

How to draw Kagi Forex Chart

The Ichimoku Indicator

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