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
4 comments:
Atom:
Thanks for your description and technical presentation of the Klinger Oscillator. I've just recently stumbled onto Klinger recently and after review of several ticker charts came to the conclusions you illustrate.
You're very welcome, glad to to have helped out. Good luck.
-todd
Hi
Trend is down on ES E-mini on a 5 minute chart by checking the 100 EMA. However KO is below zero and crossing the signal line. Is it recommended to take the trade? I understand that one is going against the trend
Anonymous,
I'm not sure I follow your question. My initial response would be to perhaps wait for a strong closing bar (i.e. highest close of the last 7-bars at least).
-todd
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