Forward-Backward Exponential Oscillator by LuxAlgo

The Forward-Backward Exponential Oscillator by LuxAlgo is an advanced and sophisticated trading indicator that will assist traders in picking up directional changes in market momentum with less lag. This amazing tool can be a day trader’s game-changer, a scalper’s dream, and a stock trader’s delight. In this blog article, we’ll explore in detail how the oscillator functions, its special calculation approach, and how you can utilize it in your trading strategies.

Table of Contents

What is the Forward-Backward Exponential Oscillator?

The Forward-Backward Exponential Oscillator is a normalized oscillator that measures directional changes using a proprietary “Forward-Backward Filtering” calculation on Exponential Moving Averages (EMAs). In contrast to traditional indicators like the MACD or RSI, this oscillator provides a smoother presentation of price with reduced lag, making it ideal for fast-paced markets like forex trading, S&P 500 futures, and e-mini Dow futures.

Series of Values

This Forward-Backward Exponential Oscillator includes two series of values:

Forward Value (Blue Line): A more reactive EMA calculated forward.
Backward Value (Grey Line): A less reactive EMA calculated backward for each bar.

The way these two values cross over each other signifies changes in market momentum. When the Forward Value is above the Backward Value, it’s a sign that prices are increasing. When the Forward Value is below the Backward Value, it means prices are decreasing.

How Forward-Backward Filtering Functions

Forward-backward filtering is a method applied to linear time-invariant (LTI) filters for creating a zero-phase-shift response. This produces an effectively lag-zero indicator that provides improved market signals.

Practically, the filter is first computed forwards over a series of values, then backwards, using the prior output as input. The dual application of the filter results in a zero-lag response when used on an EMA.

Key Settings and Inputs

To fully take advantage of the Forward-Backward Exponential Oscillator, you need to master its primary settings:

Length: According to the Forward-Backward Exponential Oscillator, It determines how far into the past the EMA changes are summated. The larger the length, the slower the oscillator and the smoother it moves.
Smoothing: This alters how smooth the back-end EMA calculations are. If you increase the smoothing settings, you will have less noise and a cleaner output.
Source: Defines the price input to use for the indicator (e.g., closing price, high, low, etc.).

Visual Representation and Interpretation

The oscillator plots the difference between the Forward and Backward values as a histogram around the 50 mark. The histogram easily visualizes changes in momentum and makes it easier for traders to identify possible entry and exit areas.

Above 50: It shows bullish sentiments, implying possible long positions.
Below 50: It represents bearish momentum, indicating potential short positions.

Also, the indicator gives a look at what future Forward Values might be, which helps us understand possible market changes.

Applications to Real-Life Trading

The Forward-Backward Exponential Oscillator is a handy tool that you can use in all markets and trading styles:

Day Trading: Look for those quick moves in high-speed stocks like NVIDIA (NVDA) and Tesla (TSLA).
Futures Trading: Study S&P 500 mini futures and Dow Jones index futures market momentum.
Forex Trading: Watch for potential reversals in currency pairs such as EUR/USD and GBP/USD.
Scalping: Use the oscillator for 1-minute scalping strategies on platforms like TradingView.

The latest tips and news straight to your inbox!

Join 30000+ subscribers for exclusive access to our monthly newsletter with exclusive trading indicator guide to success!

Why Use the Forward-Backward Exponential Oscillator?

This measure is indeed different from the usual technical indicators because it offers:

Reduced Lag: Owing to forward-backward filtering, it produces a near-zero lag response.
Smooth Representation: Gives you a better picture of price action than regular EMAs.
Versatility: It can handle different asset classes like stocks, futures, and forex.

Conclusion

LuxAlgo’s Forward-Backward Exponential Oscillator is an amazing tool for any trader. Whether you’re day trading, scalping futures, or stock investing, this indicator does a wonderful job of illustrating market momentum with minimal lag, so it’s something that you need to have. Try it out on TradingView and take your trading to the next level today! For more details and expert trading analysis, visit Tradingviews Blog.