"The trouble with oscillators" (Active Trader, August 2006) addressed some of the fundamental limitations and misconceptions surrounding the technical world’s most popular group of indicators — specifically, the ideas that the dozens of oscillators found in software packages and discussed in books, magazines, and Web sites are inherently unique tools, that they "lead" price action, and that certain look–back periods or overbought and oversold levels are "better" than others.

In a nutshell, the analysis highlighted the high correlations between most oscillators, and showed how repetition of untested ideas about these tools perpetuates misunderstandings and dangerous biases.

The remainder of our discussion looks at how these problems manifest themselves in different traps that frequently snare unsuspecting traders.