The Forecast Oscillator Indicator determines the price trends and identifies market divergences. In this guide, we’ll mention the indicator and how you can trade it.
What is the Forecast Oscillator Indicator?
The Forecast Oscillator Indicator is used to identify potential trends and reversals. The FO is based on the principle that market trends tend to repeat themselves and that analyzing past price movements makes it possible to identify potential future trends.
The formula used to calculate the FO involves taking the difference between the actual and predicted prices and dividing this by the predicted price. The indicator plots a line or a histogram oscillating above and below a zero line.
It’s important to note that the indicator may appear different on different platforms. But the overall principle remains the same.
Forecast Oscillator Indicator Strategy
The Forecast Oscillator Indicator can be used in two ways; finding divergences and determining trends above or below the zero line.
When the FO is above zero, it suggests that the price is likely to rise, and you can take a long position. Conversely, a reading below zero suggests that the price may dip, and you can go short.
Additionally, you can look for divergences between the FO and the price. For example, if the price is making higher highs, but the FO is making lower highs, this can indicate a bearish reversal.
On the other hand, if the price is making lower lows, but the FO is making higher lows, this signifies a bullish reversal.
It’s important to note that Forecast Oscillator can be prone to false signals and may not work in all sideways and ranging markets. So, it’s better to apply it with other indicators.
The FO can be used on any timeframe. However, using it on longer timeframes is better for limiting false signals.
Buy Signal
- The line must cross above a zero line.
- Wait for the price to go upwards and then enter the trade.
- Set a stop-loss at the recent low.
- Exit the trade at the last high or when the line drops below zero.
Sell Signal
- The line must cross above a zero line.
- Wait for the price to go upwards and then enter the trade.
- Set a stop-loss at the recent low.
- Exit the trade at the last high or when the line drops below zero.
Forecast Oscillator Indicator Pros & Cons
Pros
- The indicator can detect trend continuation and reversals.
- It is relatively easy to use.
- The Forecast Oscillator Indicator can be used on all timeframes.
Cons
- The FO is a lagging indicator based on past price data and may not always work to determine the trend direction.
- The indicator can generate false signals, especially in ranging or sideways market conditions.
Conclusion
The Forecast Oscillator Indicator can be used to identify the market trend and divergences. It can be used as a trend-following and a trend-reversal indicator. The indicator works on all timeframes and should be used with other technical analysis tools for further signal confirmation.
Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more. I share my knowledge with you for free to help you learn more about the crazy world of forex trading! Read more about me.
