What Is 'Price Zone Oscillator'

The Price Zone Oscillator is a technical indicator that measures whether or not the most recent closing price is above or below the preceding closing price.

Breaking Down 'Price Zone Oscillator'

The Price Zone Oscillator is a technical indicator that measures whether or not the most recent closing price is above or below the preceding closing price. The indicator is calculated as a percentage ratio between two exponential moving averages (EMAs) and is used by traders and market timers to identify overbought or oversold conditions, as well as potential reversal opportunities.

Calculating the Price Zone Oscillator

The oscillator can be calculated using the formula:

Price Zone Oscillator = 100 x (CP / TC)


CP = the closing price of the X-period exponential moving average of the current price

TC = total close of the X-period exponential moving average.

The highest possible value is 100 and the lowest possible value is -100, but traders also watch key levels in between the range for signals.

Exponential moving averages - and especially the 14-day EMA - are used to smooth out the Price Zone Oscillator rather than simply using raw closing prices. If the current period’s closing price is higher than the prior period’s closing price, the indicator will have a positive value for that period. Otherwise, the indicator will have a negative value for the period.

Using the Price Zone Oscillator

Traders use the Price Zone Oscillator like any other oscillator by looking for overbought or oversold conditions and convergence/divergence with the security’s price. According to the author’s original article appearing in the Technical Analysis of Stocks and Commodities, the oscillator’s key levels to watch include -60, -40, -5, +15, +40, and +60.

As with other oscillators, traders watch for overbought or oversold conditions when extremes are reached. Traders also look for convergences or divergences between the oscillator’s trend and the price trend, which can be an important sign of an upcoming reversal. For example, a rising stock price and a falling PZO reading could signal a potential bearish reversal.

Most traders use the Price Zone Oscillator in conjunction with other technical indicators or chart patterns, such as the Average Directional Index, which measures the potential strength of trends. By using several indicators in tandem, traders can maximize their odds of success. The indicator may also work as a contrary tool, taking opposing trade entries when an indicator divergence appears more potent than a directional buy or sell signal.  


  1. Klinger Oscillator

    The Klinger Oscillator was developed to determine the long-term ...
  2. McClellan Oscillator

    The McClellan Oscillator is a market breadth indicator that is ...
  3. Chaikin Oscillator

    Chaikin Oscillator is a technical analysis tool used to measure ...
  4. Overbought

    Overbought refers to a security that traders believe is priced ...
  5. Technical Indicator

    Technical indicators are mathematical calculations based on the ...
  6. Oversold Bounce

    An oversold bounce is a rally in prices that occurs due to the ...
Related Articles
  1. Trading

    Percentage Price Oscillator – An 'Elegant Indicator'

    The percentage price oscillator, which measures momentum, is among the more sophisticated tools in the technical analysis arsenal.
  2. Trading

    Best technical indicators to pair with the stochastic oscillator

    Learn how the stochastic oscillator indicator is sensitive to price, and discover technical indicators traders use to complement it such as the RSI and MACD.
  3. Trading

    An Introduction to Oscillators

    Find out how this indicator may help improve the average investor's entry and exit points.
  4. Trading

    How to Use the Chaikin Oscillator

    What's the best way to reconcile increasing or decreasing volume with price fluctuations? Enter the Chaikin Oscillator.
  5. Trading

    MACD And Stochastic: A Double-Cross Strategy

    The stochastic oscillator and the moving average convergence divergence (MACD) are two indicators that work well together.
  6. Trading

    Combining Trend and Countertrend Indicators

    In the long run, one of the best approaches might be to meld these two disparate methods.
  7. Trading

    Discovering Keltner Channels and the Chaikin Oscillator

    It's time to acquaint yourself with some lesser-known yet effective technical indicators.
  1. What are the most common momentum oscillators used in day trading?

    Take a look at some commonly used momentum oscillators that can also be used for intraday trading, such as stochastic oscillators ... Read Answer >>
  2. How do I read and interpret an Stochastic Oscillator?

    Understand the basics of the stochastic oscillator and how analysts and traders use this measure of trend momentum to predicts ... Read Answer >>
  3. How do I use Stochastic Oscillator to create a forex trading strategy?

    Learn about the stochastic oscillator and how to it is used to create an effective forex trade strategy, including how to ... Read Answer >>
  4. What is the difference between Stochastic Oscillator and Stochastic Momentum Index?

    Discover how the stochastic oscillator and the Stochastic Momentum Index differ and why the latter is considered a more refined ... Read Answer >>
  5. What are the main differences between Williams %R oscillator & The Relative Strength ...

    Learn about the Williams %R indicator and how this momentum oscillator differs from the relative strength index (RSI) both ... Read Answer >>
  6. Is a Slow Stochastic Effective in Day Trading?

    The good news is that most technical indicators can be adjusted to be of value to a day trader. Read Answer >>
Trading Center