Centered Oscillators are leading indicators that oscillate above and below a midpoint and typically don't have an upper or lower limit. Because there is no range limit and these unbounded indicators can technically go as high or as low as they want, overbought and oversold conditions are not easy to find, though extreme readings are used in some strategies. These technical analysis tools each have a different internal logic and most (though not all) are used to gauge the strength or weakness of momentum.
This is done by looking at the indicator value relative to its midpoint or center line. Traders often use them in combination with others tools and techniques and look for a combination of signals. There are many centered oscillators such as the
Moving Average Convergence/Divergence (MACD), the
Commodity Channel Index (CCI) and the
Momentum Indicator (MOM).
