Successful traders always follow verified and proven trading strategies. This allows them to protect their capitals from vanishing. A behavioral strategy should include at least several technical indicators that make it possible to objectively evaluate the situation in Forex and promptly receive signals indicating that there is an opportunity to enter the market or close the trade. One of the most popular is the McClellan Oscillator. In the article, we will take a closer look at it and identify the major benefits of its use.
The McClellan Oscillator is the original name of a technical indicator that enables you to estimate real market breadth by comparing the number of advancing and declining assets for a selected period. The tool was created in the middle of the last century and in the late 90s was considered one of the most popular among traders.
The formula for determining the market range by using bullish and bearish candles is quite complex, but having understood the specifics of trading with the indicator, it can be used even by beginners in Forex.
The indicator is not included in MT4 and MT5 by default, but you can easily add it to each of the terminals. However, experts advise not to change the parameters (the period for moving averages) if a trader has not fully understood the formula. In that case, it is better to trade using the default settings.
The McClellan Oscillator uses the difference in the number of uptrend and downtrend periods. Under such conditions, the indicator determines a stable upward or downward trend in Forex in relation to the observed asset. The main feature of the McClellan Oscillator is that it can detect a stable trend towards market expansion during a growing price movement from negative to positive values.
The indicator that crosses the zero mark while moving upward shows a bullish trend, and when the direction is down, we can be sure of the formation of a bearish trend.
There are two basic principles behind trading with the McClellan Oscillator. The first one involves accounting for the signals that occur when crossing the zero mark. In the second case, it is worth paying attention to the divergence between the chart of the traded asset and the analysis chart.
To buy a financial asset, you should follow the algorithm:
There are many trading strategies based on utilizing this oscillator, and each of them is unique and effective in its own way. We will consider only the basic principles of the formation of common behavioral patterns in Forex:
Breakout of the zero level alone can be considered a signal. In this case, you should open a long position or close a short one when the line moves upwards. It is worth opening a short position or closing a long one if there is a reverse downward movement.
You can buy whenever the indicator goes below -70.
It is worth selling when the oscillator reaches or exceeds +70.
Following these tips, you will be able to develop your own trading strategy. It should be remembered that no technical indicator guarantees that a certain signal is 100% accurate, otherwise Forex trading would be much easier. It is essential to use several indicators simultaneously to filter out extraneous noise and more likely to identify the correct signals for entering and exiting the market.
If you are not willing to spend time studying dozens of technical indicators but do not want to give up the idea of earning in Forex, we suggest using unique Expert Adviser. They operate based on verified strategies from leading industry professionals.
Automation enables such an advisor to operate in the market all the time without making mistakes and strictly following the algorithm even if the trader’s terminal is closed. Thus, you can do much more interesting things while the robot is increasing your capital and minimizing losses.