where m is bigger order of average, n is lower order of average.
Classic index usage is to open trades towards oscillator's lines pertaining to zero level. When the CHO is above zero, it suggests an emerging upward price trend. In this case, it is recommended to place a long trade. If the indicator is below zero, as a rule, the price is likely to continue moving downward. Consequently, traders should take into account a bearish outlook.
The Chaikin Oscillator forms bullish and bearish convergence/divergence in terms of price chart, along with the majority of oscillators used in technical analysis. Moreover, using this feature one should take into account the fact that in most cases divergences and convergences of the Chaikin index consist of 2 or 3 consecutive dynamic movements. This rule allows to filter a considerable amount of single signals, as they are often not worked out by the market.
The one of the most interesting methods of the CHO's application is its building and the market analysis combined with sliding average (SMA, 3), moved by 1 bar to the right in relation to the chart of the Chaikin Oscillator.
By using this approach, it is necessary to respond to the situation when sliding average moving downward crosses lines of the index in terms of the probability of price drop and upward in terms of price rise. In this case the signal is leading. However, it can be false if divergence and convergence have not formed on the oscillator.
Despite the decrease in the number of signals, usage of additional filter provides you with better signal sampling.
Slowperiod = 10
Fastperiod = 3
TypeSmooth = 0
SMAPeriod = 3
SMAshift = 1