Technical Trading Tips and Techniques by 
Many forex traders and technical analysts tend to regard price as king, and treat oscillators (like Stochastics, RSI, ROC, MACD, CCI, etc.) merely as secondary analytical tools for confirming price momentum. But there is a substantial population of traders out there that concentrate almost exclusively on the movements of a specific oscillator, often at the expense of focusing on price itself. One prominent example that comes to mind is Woodie’s CCI Club, whose legion of loyal followers trade solely based upon patterns found in the Commodity Channel Index (CCI) oscillator. Other traders use ranges in RSI, for example, to decipher trend direction and determine high-probability entries at potential turns. Yet other traders draw trendlines on Stochastics, instead of on price, to pinpoint breakout trades and/or pullback entries. Although this type of trading can seem counterintuitive to those who uphold price action as the sole reliable indicator, oscillator trading has made some good financial sense for many people. Just some food for thought.
- James
James Chen is the Chief Technical Analyst at FX Solutions, a leading Forex broker. He is also a registered Commodity Trading Advisor (CTA) and a Chartered Market Technician (CMT) Level 3 candidate. At FX Solutions, Mr. Chen writes daily currency analysis, conducts forex trading seminars, and has authored numerous articles on currency trading and technical analysis for major financial publications. His upcoming book, Essentials of Foreign Exchange Trading
“Yet other traders draw trendlines on Stochastics, instead of on price”, “to pinpoint breakout trades and/or pullback entries.”
Hi James’
Nice article, If you gives some trading examples visually for better understanding. and methodology or psychology of doing this.
Thanks.
Hi James, You raise some great points. Price and oscillators do work best in combination with each other. In addition to this, trendlines can be drawn on both for additional clarity. Additionally, using a range of time periods on the same oscillator can also be insightful ie using a 13 period as well as a 34 period on the RSI.
Hi St_Fx and Nowl,
Thanks for your comments! St_Fx, I will put up some chart examples of that soon. And Nowl, great point on the time periods. Thanks!
- James