Ups and downs.

Most technical indicators and oscillators fall to recognize the importance of intraday activity. Here's a couple of oscillators that take these important price levels into consideration, while at the same time letting you run with the trend.

At one time or another, every trader experiments with market timing oscillators. The two most popular such indicators are the Relative Strength Index (RSI) and stochastics. Welles Wilder released the formula for the RSI in a book published in 1978. Despite the claims made to the contrary, the person behind stochastics was Ralph Dystant, although the name "stochastics" was coined by Tim Slater when he, together with Rick Redmont, put together a library of indicators in the late 1970s.

About the same time, both indicators were introduced into two major chart publications that were used by Larry Williams in his series of successful commodity seminars. Together with the release of ComTrend, the first computerized intraday charting service, this implicit endorsement - however unintended - quickly made both indicators widely followed. The widespread acceptance of these and many other indicators, however, neither justifies nor confirms their effectiveness and applicability.

TD REIgns

As is the case with most overbought/oversold oscillators, they rely on a series of price relationships based upon one closing price level vs. the closing price level of the preceding price bar. However, other than what seems to be the convention, there exists no other justification for using these specific components. In fact, by relating intraday price activity with the intraday price activity recorded two price bars earlier, identifiable trends will become more apparent while aberrant short-term price behavior caused by fleeting news developments will assume a less significant role. One oscillator that compares the intraday relationship with the most recent trading bar and the trading bar of two days ago is TD REI (see "RE-Interpretation," below).

The method for calculating the standard version of TD REI requires a three-step process. First, calculate the differences between the current price bar's high and the high two price bars earlier, and the current price bar's low and the low two price bars earlier and add these values together over a five-price bar period. Next, take the absolute value of all the differences previously mentioned and add these together. Finally, divide the first value with the second value. This provides the TD REI oscillator that will fluctuate between -100 and 100.