Moving Average of Oscillator (OSMA)
The Moving Average of Oscillator (OSMA) is the difference between the smoothed value of an oscillator and the original oscillator. In other words, it compares the original oscillator and its smoothed values over a specific period of time.
In this case, the MACD is used as the oscillator and the MACD signal is used as the smoothed value. This means that traders consider the difference between the MACD and the signal.
Traders can get information on the trend by using the OSMA. This means that they can tell whether prices are going up or are likely to go down. If prices are likely to go up, you’ll see a bar above zero. If prices are likely to go down, you’ll see a bar below the zero line.
Traders also use the OSMA to determine the strength of the trend. If there are a number of bars above the zero line, that indicates that there is a a strong upward movement in the price.
If you see a significant number of bars below the zero line, that means that there’s a strong trend towards falling prices. If it looks like prices are trending upwards but you’re not certain how long that trend will remain, you can use the OSMA to confirm what other indicators are saying about how long the trend may last or the duration of the trend.
Calculation of Moving Average of Oscillator
The following formula is used to calculate Moving Average of Oscillator:
OSMA = MACD-SIGNAL
These symbols are used in the formula:
OSMA = Oscillator of a moving average
MACD+ Moving average convergence Divergence, a trend-following oscillator
SIGNAL = the signal line that’s used to smooth the graph