# Oscillators on : why do we need them?

In the currency market, the price can be either in a trend or in a flat. To trade in fluteThe oscillators are also used in the market, which is also called a sideways trend or a sideways trend. What kind of indicators are they and what kind of information can be extracted from them?

## The essence of the oscillator

As a rule, oscillators are placed under the price chart or, as traders say, "in the basement". During the price movement, the oscillator curve or histogram follows the same direction. That is, both the oscillator and the price move together. But oscillator's oscillations differ from the price oscillations and sometimes they are very important. The matter is that the value of growth or decline of the oscillator is always limited by definite limits as, most often, it is measured in percents and can't be more than 100 and less than 0.

## Oversold and overbought levels in Forex

What information can I get from the oscillator readings? If the oscillator curve approaches the upper bound of 100%, it indicates that the price has been moving up for a long time and there is a high probability of a pause, correction and, possibly, a reversal. In other words, the price is said to have entered the overbought zonewhich traders mark in the oscillators at the level of 70 or 80. This means that buy positions can be closed and prepare to sell.

If the oscillator curve is at the 0% level, traders say that the price has entered the oversold area. In oscillators, it is usually the 20 or 30 level. It means that the price has been declining for a long time and the probability that it will stop, correction or reversal will start is quite high.

Almost all oscillators work according to this principle. At the moment there is a large number of them, their signals with the same indicator settings are identical and have a small spread in time, so it will be enough to use only 1-2 oscillators for trading.

## Peculiarities of using oscillators

As already mentioned, oscillators are designed for trading in the flat. Only in this case their signals can be trusted and used when opening positions. The logic is simple - in the flat the forces of bulls and bears are approximately equal, which determines the neutral price dynamics, while in the strongly pronounced uptrend Buyers prevail and the oscillator will constantly be near the overbought zone, in downtrend - at the oversold zone

The following feature is characteristic not only for oscillators, but for all indicators. In order to understand it, we should clearly realize the principle: the price forms the indicator, not the indicator. In other words, the oscillator cannot provide any principally new information than that which is already present in the price. The oscillator is based on price readings during the passed period and displays only the results of their processing. When trading on the currency market, it is important to see the whole picture, rather than make decisions based on some individual fragments.

oscillators are a very effective tool when trading on the foreign exchange market, acting as a source of trading signals and as filters in strategies. Nevertheless, we should not forget that an indicator is just a visualization of price dynamics over the past period, and no indicator, even the most accurate one, is capable of evaluating the situation on the market and making a trading decision.