THE HAnDbook of TECHniCAl AnAlysis- Detrending moving averages (price oscillator, etc): We may also employ a
price oscillator when trying to isolate potential cycles in the market. A price
oscillator tracks the difference between price and a moving average. It helps to
identify periods of overextensions that are usually related to peaks or troughs.
In Figure 20.23, we tuned the price oscillator to detrend price against an
11‐period moving average, which represents half the cycle period length of a
cycle identified on the four‐hour chart of the GBPUSD. Cycle troughs at time
lines 1 and 2 were used to project the cycle lines forward in time. Notice how
cycle troughs tend to occur at time lines 3 to 7 every time the oscillator tests
figurE 20.23 Identifying Cycles via a Price Oscillator on the 4‐Hour Chart of GBPUSD.
Source: MetaTrader 4
figurE 20.24 Identifying Cycle Peaks via Envelope Analysis on the 4‐Hour Chart of
GBPUSD.
Source: MetaTrader 4