The popular oscillator indicators are mostly used by the traders nowadays. The reason is that these things are able to give a real impact for the trading result. So, what are those points？

Based on a reference, Those are Stochastic and RSI. Generally, these are used to identify the overbought condition and also oversold at the same time. These are not the end.

They are also great to identify the price movement divergence situation. However, those two are made With the different basic philosophy and formulas. That is the point here.

That is why; the use of these popular oscillator indicators must be suited with the market situation. It is especially for its application and interpretation. Below is the further description.

First is Relative Strength Index

It is also known as RSI. This one is made to measure how quick the price movement speed is. In this measurement model, the movement is assumed as elastic. What does it means？

It means that they can move up to certain distance from the present price. That is usually before they are reversed or Retrace. A faster hike will cause overbought in this case.

Vice versa, the drastic and quick decline may trigger the oversold. You should note that the RSI value is proportionally reversed with the movement speed and price race.

That is why; this one of the popular oscillator indicators can be used to identify the conditions above. Traders are loved to use it too.

More Details about RSI

The more frequent the price increase in that time period, the higher the RSI value will be. By only changing if there is a change in the amount of the value (up or down), this one will filter out signals.

It is especially the ones that do not contain information on changes. It is also for those with a smaller measurement period, the RSI will change faster and become more sensitive too.

The range of RSI values is 0 to 100. In general, the value above 70 is assumed to be a possible overbought state and below 30 is assumed the possibility of oversold.

Popular Oscillator Indicators: Stochastic

Stochastics rather measures the momentum where the price movement has reached an overbought or oversold state. That is why; it can identify possible retraces or reversals.

The Stochastics indicator formula is based on the current price deposition compared to the range in a certain period of time. The basic philosophy of this indicator is like this.

If he trend is rising, then the price will tend to close to the highest one in the range. Meanwhile, if the trend is falling then it may tend to close to the lowest one in the range.

The same as the RSI, the stochastics value range is 0 to 100. Commonly, the stochastics number above 80 is assumed to be an overbought state with the possibility that the price will retrace (move down),

What you Can Conclude

The example above shows that RSI is more reliable for trending conditions, while stochastics are more accurate for sideways (ranging) market situation. RSI is often used on low timeframes.

That is especially the day traders to find out the speed of changes and trend tendencies in the short term. Meanwhile, stochastics are generally used by swing type to identify momentum in the medium to long term.

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