UK Accounting Glossary
The Klinger Oscillator compares the volume flowing in and out of a security to price movement, and is then turned into an oscillator.
Calculation of the Klinger Oscillator involves the use of the Volume Force which combines close, high, low, and volume into a single indicator. The result is then converted into the Klinger Oscillator by use of a fast (34 period) Exponential Moving Average (EMA) of the Volume Force minus a slow (55 period) Exponential Moving Average of the Volume Force.
The Klinger Oscillator is a market analysis indicator that that measures trends of money flows based on volume. Three types of data are derived from the Klinger Oscillator: the high/low price range, volume and accumulation/distribution. The Klinger Oscillator can pinpoint short-term fluctuations, yet is accurate enough to track the long-term flow of money moving in and out of a security. The difference between the number of shares accumulated and distributed each day is quantified by the Klinger Oscillator and referred to as “volume force.” A signal line or 13-period moving average is used by the Klinger Oscillator to signify transaction decisions. In addition to a signal line, the Klinger Oscillator uses divergence to identify when price and volume are not confirming the direction of money flows. The Klinger Oscillator works well for timing trades in the direction of a trend, yet the Klinger Oscillator is less effective when going against a trend. Steven J. Klinger developed the Klinger Oscillator to help in both long and short term analysis.
The Klinger Oscillator (KO) is used by traders as a confirmation indicator i.e. price changes are confirmed by volume. Alternatively, a divergence between the Klinger Oscillator and price can signal a change in price trend. In this case, independent confirmation using another indicator is recommended. The Klinger Oscillator is intended to identify when price changes are confirmed by volume. The price is expected to follow the Klinger Oscillator if there is a divergence between the price and the indicator.
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This glossary post was last updated: 10th February 2020.