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Price Zone Oscillator

At Technical Analysis of Stocks and Commodities Magazine Issue June 2011 Mr. Walid Khalil, MFTA, CFTe, CETA introduced his Price Zone Oscillator (PZO) as a component of his trading system.

The idea after PZO is about finding a smoother alternative to RSI that measures momentum and strength of the price movement.

PZO depends on only one condition: If today’s closing price is higher than yesterday’s one, then the closing price will have a positive value (bullish); otherwise it will have a negative value (bearish). To know more about SZO, read the article here.


How does it work

  • The formula for PZO depends on only one condition: If today’s closing price is higher than yesterday’s one, then the closing price will have a positive value (bullish); otherwise, it will have a negative value (bearish).
  • When PZO crosses -40%, it indicates overbought conditions. If PZO crosses -60%, then it is at extreme overbought value and trend might reverse direction from down to up.
  • When PZO crosses +40%, it indicates oversold conditions. If PZO crosses +60%, then it is at extreme oversold value and trend might reverse direction from up to down.
  • Default number of candles used in calculation is 14 and we suggest not changing it except for a good reason.
  • Default calculation price is close price but I added the ability to change it to other prices like high, low, open.
  • As a leading oscillator, divergence between the price line and PZO could help you to find a reversal area in trend direction faster.


Features

  • Users can switch between both Ordinary and Dynamic levels.
  • Buy, Sell arrows to help identifying PZO oversold, overbought signals.
  • Sound, email alerts depending on user choice.
  • Well-designed style that user can control.


Most important settings

  • PZO_Bars: Number of bars or candles used in calculation (default is 14 bars).
  • PZO_Price: Price used in calculation (Open, High, Low...) (default is Close).
  • Level_Style: Switch between using ordinary Fixed Levels and Dynamic Levels.
  • DynamicLvl_Bars: Number of bars used in calculating dynamic levels.
  • DynamicLVL_Percent_1: Percent used in calculating first and last Dynamic levels.
  • DynamicLVL_Percent_2: Percent used in calculating second and fourth Dynamic levels.
  • Show_Signal: Choose to show or hide PZO signals.
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