This study is a combination of two different studies. The first set of calculations compute an oscillator. The second part computes a moving average of the oscillator. You can specify a value for a moving average of the oscillator. FutureSource computes the values and displays two lines. Trading signals occur whenever the two lines cross. It is a relatively sensitive indicator and works well for intraday charts and trading, but the study generates valid trading signals for any chart type available within the FutureSource software system.

Trading signals for this study use a crossover system. If the oscillator crosses from above the moving average to below the moving average of the oscillator, establish a short position. Conversely, if the oscillator crosses from below to above the moving average of the oscillator, establish a long position.

Parameters:

• First (6) - the number of bars, or interval, used to calculate the first Moving Average.
• Second (21) - the number of bars, or interval, used to calculate the second Moving Average.
• Difference (6) - the number of bars, or interval, used to calculate an additional Moving Average.

Computation

In this study, the oscillator is the difference between the first two moving averages. The formula is:

OSCt = (MA1 - MA2)

• OSCt is the value of the oscillator for the current period.
• MA1 is the first moving average.
• MA2 is the second moving average.

The second part of the study computes a moving average of the oscillator. The formula is:

MAosc = (OSC1 +... + OSCn) / n

• MAosc is the moving average of the oscillator.
• OSCn is the oscillator value for the nth period.
• n is the moving average length for the oscillator.

Since the second value is a moving average, it rises and falls more slowly than the oscillator. Hence, the two lines generate crossover points. These points are the buy/sell signals.