The Klinger Oscillator is used for determining money flow of a given security or index. It was developed especially to accommodate the long-term trend as well as short-term fluctuations. Money flow measures the total amount of money moving in and out of a security.
How to use the Klinger Oscillator
The Klinger Oscillator shows the volume moving through the security along with price. The oscillator is then shown as a difference between two moving averages.
To use the Klinger Oscillator, you only need to look at the oscillator along with the signal line, which is based on a 13-period moving average. The signal line will generate entry and exit points as part of an overall strategy through crossovers, convergences, and divergences.
The direction of the overall trend will also affect how you use the Klinger Oscillator. For example, if a security is in a strong uptrend, you could set your order entry when the oscillator moves above the signal line. In a downtrend, this principle works in reverse. You would be wise to sell or go short when the oscillator moves from above the signal line to below.
Weaknesses of the Klinger Oscillator
Like all indicators, the Klinger Oscillator is not without its limitations. The signal line crossovers are a common occurrence, and it can, therefore, become difficult to know which signals are genuine and which lead to unfavorable whipsaws.
Divergences are another tricky technical feature that can leave many traders stranded on the wrong side of a trade.
For these reasons, it’s recommended to not solely rely on the Klinger Oscillator for generating signals and instead look for more comprehensive trading tools such as moving average crossovers, signals generated by momentum indicators and price patterns.
By applying the above advice together with other indicators you can best put yourself into a position of making the most profitable trades possible.