There are many different kinds of indicators that traders can use in technical analysis of the markets. One group of them is called oscillators and you will get to know the Pretty Good Oscillator in today's article.
What is the Pretty Good oscillator?
The Pretty Good indicator, known also as PGO or PG oscillator was invented by Mark Johnson. It was designed to measure the distance between the present close and its N-day simple moving average. It is expressed in the average true range during a similar period.
The PGO is calculated by subtracting N period SMA from the closing price. The result is then divided by N period EMA of the ATR.
How to add the PGO to the IQ Option chart
Log in to your IQ Option account. Choose the asset. Set the chart type. Next, go to the Chart analysis button, where you have three tabs, Indicators, Templates and Widgets. Under the Indicators tab there are some categories. Click Momentum indicators and you will find the Pretty Good Oscillator on the list that will unfold on the right side.
The PG oscillator appears in a separate window beneath the price chart. The line of the indicator is moving around the middle horizontal line of value 0.
The default period (the number of bars used in calculations) is 14. You can adjust the indicator's settings by clicking on the settings icon in the indicators window.
How to use the Pretty Good Oscillator in trading on IQ Option
You must observe how the PGO relates to the 0 line. The moment it crosses the line on its way up is a signal to open a buy position. When the PGO is crossing the 0 value on the way down, you should enter a sell transaction. Levels 2 and -2 marked on the chart can be used as starting points of oversold and overbought areas. It works similar to 70 and 30 levels in the RSI.
It is also possible to catch divergences with the Pretty Good Oscillator. The divergence occurs when the indicator and the price are not moving in a similar direction. Let's take a look at the exemplary chart below.
The price is rising while the Pretty Good Oscillator is falling. This is a bearish divergence and a signal of a possible change in the trend direction.
The Pretty Good indicator is pretty good and easy to apply. As with any other oscillators it moves around a specific value. It produces signals to open transactions when the middle 0 line is crossed. Moreover, you can catch divergences with it.
You can use the Pretty Good Oscillator in combination with other indicators to get better results.
Make use of the IQ Option practice account. It is free of charge and supplied with virtual cash. This way you do not risk your own money while getting to know a new oscillator. Check how the PGO works for yourself and share your experience with us. There is the comments section below which is designed exactly for this. I would be glad to hear from you!
Wish you good trading decisions!
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