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Technical Indicators

Sat, Jul 5th, 2025
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The descriptions, formulas, and parameters shown below apply to both Interactive Charts and Snapshot Charts, unless noted. Please note that some of the parameters may be slightly different between the two versions of charts.
Studies noted with * are available only in Snapshot Charts and those noted with ^ are available only in Interactive Charts.
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Derivative Oscillator

Apply To: New Pane

Chart Type: Interactive Only

The derivative oscillator blends the concept of double smoothed relative strength index (RSI) with the graphical representation of the moving average convergence divergence (MACD) indicator. It represents an attempt to improve on the predictive ability of the RSI and MACD individually and has both price reversal and trend following properties.

The use of the derivative oscillator is straightforward. If the oscillator is positive, this is considered a bullish sign. If it is negative, this is a bearish sign. Crossovers of zero denote a potential trade signal. If the value of the derivative oscillator is running from negative to positive (up-sloping), this is taken as a bullish signal. If the value is running from positive to negative (down-sloping), this is taken as a bearish signal. The strength of certain trends can also be determined by looking at the magnitude of the various bars. The greater the positive magnitude of a bar, the greater the strength of the uptrend. The greater the negative magnitude of a bar, the greater the strength of the downtrend.

Sample Chart:

Derivative Oscillator

Calculation:

The derivative oscillator is calculated in multiple steps.

It begins with the calculation of the RSI. The RSI is then smoothed by taking an exponential moving average of itself. Then it is double smoothed by taking an exponential moving average of the original smoothing. A “signal line” is formed by taking a simple moving average of the RSI. The derivative oscillator is then found by taking the double smoothed RSI and subtracting the signal line.

1. RSI = 100 – 100/(1 + RS)
RS = Average Gains / Average Losses

Average Gains are computed as the average price change for the positive price bars in the data sequence included. Average Losses are computed as the average price change for the negative price bars.

A simplified RSI is equal to:
Simplified RSI = Gains / (Gains + Losses)*100

Gains are equal to the sum of the positive price bars. Losses are equal to the sum of the negative price bars.

2. Next, we need to apply an exponential moving average (EMA) to the RSI.

Smoothed RSI = EMA(RSI)
Double Smoothed RSI = EMA(Smoothed RSI)

3. Next, we form a “signal line”, which is the equivalent of a simple moving average (MA) or the double smoothed RSI.

Signal Line = MA(Double Smoothed RSI)

4. Finally, we can produce the final calculation with the two end elements we’ve calculated. The derivative oscillator becomes the difference between the double smoothed RSI and the signal line.

Derivative Oscillator = Double Smoothed RSI – Signal Line

Default Parameters:

  • PeriodRsi: 14
  • PeriodEma: 5
  • PeriodEma2: 3
  • PeriodMa: 9
  • PeriodSig: 9

Source: https://www.daytrading.com/derivative-oscillator

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