The difference between oscillators and indicators

In the early stages of learning to trade, few people pay attention to the characteristics and subtleties of various indicators.

In most cases, over a long period of time, almost every beginner looks at indicators as some kind of lines that, when crossed, give a signal to buy or sell.

Incidentally, even more experienced traders are guilty of this short-sightedness. Typically, this view leads to only one outcome, and it's fatal for your account. 

This is because you're making your trades based not on factual evidence, but simply because the line crossed something or moved in some unusual direction. For you, these are lines and patterns, nothing more.

Understanding the purpose of each indicator type often comes when creating your own trading strategy. At this stage, you should understand the differences between oscillators and other indicators, the essence and purpose of oscillators in a strategy, and which indicator groups can solve specific problems.

Types of indicators. Main purposes

Creating your own trading strategy is very much like a construction kit, where you use prefabricated building blocks to create a coherent structure. Therefore, to achieve truly positive results, you must at least understand the functions and properties of various indicator groups.

It's no coincidence that all indicators are divided into groups such as oscillators, trend indicators, and volume indicators. This raises the question: what is the difference between oscillators and other indicators?

What's the difference between trend indicators and oscillators, and what is the purpose of a group of indicators like volumes? To understand these questions, let's look at each group separately.

Trend indicators

The main purpose of trend indicators is to monitor the current market situation. As the group's name suggests, trend indicators are excellent at displaying the current market situation, global trends, and trend direction.

For a beginner, trend indicators help to discern the current market direction, which can sometimes be difficult to spot for the untrained eye.

Volumes

Volume indicators are designed to identify so-called major players. It's no secret that behind every rise or fall is a certain amount of money supply, which is what triggered the surge.

So, thanks to the indicators from this group, a trader can find out whether a certain jump is backed by capital or whether it is simply a false movement without any support.  

Oscillators

Oscillator indicators are used by traders because of their sensitivity to market reversals. Simply put, oscillators have the ability to predict potential market reversals in advance.

Many people mistakenly believe that oscillators only show global reversals, but in practice, it is oscillators that help raiders enter on pullbacks.

So what is the fundamental difference between indicators and oscillators?

While the first two groups display the current market situation and provide entry signals with a delay, oscillators, on the contrary, indicate potential market reversal points in advance.

Essentially, this is an attempt to predict market movement, similar to the example of the Stochastic Oscillator. The Stochastic Oscillator analyzes changes in indicators such as overbought and oversold conditions and, based on these data, predicts trend changes.

Oscillators would seem to be a more advanced technical analysis tool, allowing you to enter the market ahead of most competitors.

However, it's important to remember that oscillators often generate false signals, so by combining the positive qualities of some indicators with others, you can overcome certain shortcomings and create a truly sound and profitable trading strategy .