Introduction to the DT Oscillator Indicator
The DT Oscillator Indicator is a momentum indicator which identifies and indicates momentum direction as a two lined oscillator. It is an oscillator which is derived from two popular oscillators, which are the Relative Strength Index (RSI) and the Stochastic Oscillator (SO).
What is the DT Oscillator Indicator?
The DT Oscillator Indicator plots two oscillator lines, one faster than the other. The faster line, which is the main oscillator line is represented by a deep sky blue line, while the slower line, which is its oscillator signal is represented by a pale violet-red line. It also fills the space between the lines powder blue to indicate a bullish momentum, and misty rose to indicate a bearish momentum.
The lines oscillate within the range of zero to 100, with markers at 30 and 70. Crossovers developing below 30 is indicative of a mean reversal coming from an oversold position, and crossover above 70 indicates a mean reversal from an overbought position.
How the DT Oscillator Indicator Works?
The DT Oscillator uses an algorithm which calculates a Stochastic Oscillator derived from an RSI instead of price. It then plots the oscillator lines, just like a regular Stochastic Oscillator. However, the lines it plots tend to be smoother since it is derived from another oscillator.
How to use the DT Oscillator Indicator for MT5
This indicator has several variables which can be modified to adjust its sensitivity.
“Rsi period” refers to the number of bars used to calculate for the underlying RSI.
“Stochastic period” refers to the number of periods the indicator uses to calculate for the SO lines of the RSI.
“Slowing” refers to the smoothing variable added to the SO lines.
“Signal period” adjusts the number of periods used on the oscillator signal line.
This indicator can be used as a mean reversal signal indicator. Traders can simply wait for the SO lines to breach above 70 or drop below 30 and trade the crossovers of the two SO lines as a mean reversal signal.
Buy Trade Setup
When to Enter?
Wait for the SO lines to drop below 30. Open a buy order as soon as the faster SO line crosses above its oscillator signal line pair. Set the stop loss on the support below the entry candle.
When to Exit?
Close the trade as soon as the faster SO line crosses below its oscillator signal line pair.
Sell Trade Setup
When to Enter?
Wait for the SO lines to breach above 70. Open a sell order as soon as the faster SO line crosses below its oscillator signal line pair. Set the stop loss on the resistance above the entry candle.
When to Exit?
Close the trade as soon as the faster SO line crosses above its oscillator signal line pair.
Conclusion
This indicator is an effective mean reversal signal indicator based on momentum. It can be used both on ranging markets with clear support and resistance areas, as well as trending markets trading in the direction of the trend. These crossover signals also work best when in confluence with price action based technical analysis.
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