Start your research by working through at least 5 years of price history, keeping notes of everything that seems to be important. As you research, you will begin to see things of interest that have the potential to develop into Setups. You may find an oscillator high that is below the previous oscillator high—but what if there’s a double top? What happens if the oscillator is higher and prices are lower? You must thoroughly check each and every combination. Over a relatively short period of research time, the combinations with profit potential will become apparent to you.
There is no single formula for successfully developing oscillator patterns, but starting with these guidelines will save you both time and money as you develop your own approach.
- Do a bare minimum of 5 years of research on anyone oscillator pattern. My own experience in evaluating oscillator/price combinations is that it is important to research a large number of samples. This research will give you the confidence to establish positions at tops and bottoms against the prevailing market sentiment. If you don’t do at least 5 years of research (and preferably 10 or 20), when you begin trading the patterns you are likely to encounter situations that you have not anticipated that almost always cost you money.
- Keep a notebook as you research to record your finds, and note additional areas to explore later. If you try to add these to your original research, you are likely to lose direction. Over a period of time, as you review your notes, you will find that some things come up again and again, and you will be able to isolate gems that are like money in the bank.
- Learn one oscillator well. One of the reasons people have difficulty making money in the markets is that they try to evaluate too many oscillators, or trade too many markets. By focusing your research on one oscillator in several markets you will learn much more than the person jumping from oscillator to oscillator and trade to trade. And what you learn in that single oscillator can often be applied to other oscillators.
- This boils down to identifying and quantifying oscillators and patterns the inexpensive way —on paper. Most of us have a tendency to do it the expensive way — “It looks so good I’m sure it will work this time, and I’ll research it later.” You know what happens
- Do not rely on only a single oscillator. A thorough study of each individual oscillator can produce patterns that will make money. Combinations of oscillators can increase the performance of individual oscillators. Also, no oscillator will pick every top and bottom, and some sizable moves can be missed by relying on just a single oscillator.