Technical indicators are designed to help you make accurate decisions in trading. There are plenty of them on the IQ Option platform. It is a good idea to get familiar with them so you can choose the ones that suit you best. To make this choice easier I describe them for you regularly. Today I will introduce the Chande Forecast Oscillator.
Introduction to the Chande Forecast Oscillator
The Chande Forecast Oscillator measures upward and downward momentum without smoothing the results, activating the oversold and overbought penetrations more often. It ranges between -1 and +1. It falls into oversold and overbought areas when oscillates below -0.5 or above +0.5.
There are three key matters for the oscillator.
- First, the timeframe a trader chooses has a great influence on the signals.
- Second, the signals from the absolute oscillator levels are often less credible than the signals received from the recognition of the patterns.
- Third, in the case of the strong trend in the market, the oversold and overbought indicators are not very successful.
Adding the Chande Forecast Oscillator to the IQ Option platform
Setting up the oscillator comes down to finding its name on the list of indicators. To access this list you should first click on the chart analysis icon. Next, choose the “Momentum” from the available categories. A new list will unfold. You will find the Chande Forecast Oscillator there.
The Chande Momentum Oscillator indicator's formula
The Chande Forecast Oscillator formula calculates the distinction in the sum of the last profits and the sum of the last losses. The result is divided by the sum of total price movements in the relevant period.
Chande Momentum Oscillator = (sH – sL) / (sH + sL)
sH represents the sum of higher closes during N periods
sL is the sum of lower closes in N periods
To calculate the Chande Forecast Oscillator you will have to calculate the sum of higher closes in N periods first. Then, calculate the sum of lower closes in the same number of periods. Subtract the second result from the first one. Then divide it by the sum of both results.
How to use the Chande Forecast Oscillator
The Chande Forecast Oscillator can be used in a few ways. The first one requires adding a moving average with period 10. When the indicator exceeds the moving average, it produces a bullish signal. A bearish one will occur when the indicator falls beneath the moving average.
The moment the Chande Forecast Oscillator crosses below or above the 0 line can be utilised as a confirmation of the signal given by different moving averages crossovers.
Another option is to use the Chande Forecast Oscillator as a measurement of the trend strength. Simply check the oscillator value and it will indicate whether the anticipated trend will be strong or weak.
Lastly, it can be used to catch negative and positive price divergences between the oscillator and underlying asset. By negative divergence we mean the situation when the price of the asset is rising, but the Chande Forecast Oscillator is falling. A positive divergence is in the opposite scenario: the price on the chart is falling but the indicator is going up.
An example of using the Chande Forecast Oscillator on the IQ Option platform
In the following example, you can notice a negative divergence. The price of the EURUSD currency pair is rising. At the same time, the Chande Forecast Oscillator is falling. The moment to enter a sell position requires some additional signs such as candlestick formation.
This is all you need to know about the Chande Forecast Oscillator. Head over to your IQ Option free demo account and practice using it on the platform. You can learn there to catch the signals on time to make profitable transactions. Then, you are ready to switch to the live account and start making real money.
Best of luck!
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