Oscillator of moving average (OsMA)

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    OsMAThe oscillator of moving average (OsMA), is an indicator that shows the momentum of price action.

    It is calculated by taking the difference between a shorter-term moving average and a longer-term moving average.

    The two most common are the 12-period moving average and the 26-period moving averages. Because of this, it is best described as a modification of the MACD indicator.

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    A cross through the zero or centre line can be a very simple way to decide if momentum is gaining to the bullish side, or if it is falling to the bearish side. Traders will use the side of the line that the histogram is on to help them decide which direction they want to be in a particular market.

    The OsMA essentially indicates when a security is overbought or oversold, or when a new trend is forming.

    OsMA calculated from the MACD

    Using the calculations derived from the MACD, the OsMA number_1 indicator is plotted as shown in the illustration below.

    MACD and OsMA

    The chart below shows a EUR/USD currency pair with an OsMA indicator displayed underneath.

    OsMA

    When the oscillator approaches the upper extremes of the indicator 1, it shows that the asset could be overbought. When it approaches the lower extremes, it indicates that the asset could be oversold 2.

    Usually, when the indicator turns from positive to negative, it shows that a downtrend could be starting to form 3. When the indicator turns from negative to positive, it can indicate that an uptrend could be starting to form 4.

    Discuss the OsMA and other indicators in our forum.

    Further reading

    Find out more about the OsMA and how to use indicators to suit your trading style:

    Learn how to trade using moving averages:

    Learn how to read charts using technical analysis:

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