Prime Number Oscillator

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Introduction

Determining market trends has become a science even though a high number or people still believe it’s a gambling game. Mathematicians, technicians, brokers and investors have worked together in developing quite several indicators to help them better understand and forecast market movements.

Developed by Modulus Financial Engineering Inc., the prime number oscillator indicates the nearest prime number, be it at the top or the bottom of the series, and outlines the difference between that prime number and the respective series.

Essential assumptions

We call prime an integer positive number that has no positive integer divisors other than 1 and itself, so it is a positive integer (p>1) that has exactly one divisor other than 1 (17 can be divided by 1 and 17 – it’s prime; 18 can be divided by 1, 2, 3, 6, 9 and 18 – it’s not prime).Numbers that appear in a specific order are said to create a sequence. Similar to a set, a sequence contains elements (terms), but unlike a set, the terms of a sequence follow a specific rule, are situated in a certain order.

In mathematics, the Fibonacci numbers create the following integer sequence : 0,1,1,2,3,5,8,13,21…. . Traders use this sequence to determine future market movements. The Fibonacci sequence is applied in trading through several methods and they are comprised in the Fibonacci Box. The box contains: the Fibonacci extensions, retracements, circles, fan and time methods. Using the numbers in this sequence and sometimes the sequence itself, investors manage to time certain turns in the financial market movements.

One way to use prime numbers in trading is through the prime number oscillator. It is highly useful indicator in identifying changes in the market. As it underlines the difference between the nearest prime number and the evolution of the prices series, it is easy to see when it is better to buy or sell.Therefore, whenever the indicator is constant and at a high value in the positive chart, the best choice is to sell, and oppositely, when the indicator is low for two consecutive periods and is situated in the negative range, acquisition is recommended.

As for many other indicators, the parameters taken into consideration are the market open/close period, the highest and lowest point of the price of a stock at the exchange in the immediately preceding 52 weeks or the volume of stock (the average of total traded stocks at the exchange over a period of time).

Prime Number Oscillator signals 

Calculation

The prime numbers oscillator is realitevely easy to calculate. This indicator finds the closest prime number from the top or bottom of the series, and then plots the difference between that prime number and the series itself.

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Interpretation

Prime numbers oscillator is used for finding market turning points. If in the positive range the oscillator remains at the same level point for two consecutive periods consider that as a selling signal. Conversely, if in the negative range the prime numbers oscillator remains at a low point for two consecutive periods , consider that as a buying signal.

Modulus Financial Engineering Inc. also created another indicator that uses prime numbers, The Prime Number Bands Indicator. Although similar in name, the Prime number bands indicator is different from the prime number oscillator indicator, as the first one indicates a broader area where the values move. The oscillator only plots a line on the graph, but the two basically have the same purpose in forecasting the market trend turn.

Conclusion

Prime numbers have always been a mathematical mystery. But since their discovery, they have been used in a multitude of areas, including trading, where they can predict, with certain accuracy the turning points in the stock market. An important indicator is the prime number oscillator, a financial tool that plots the difference between the nearest prime number (constant) and the prices of a particular stock, in a timeline. If the indicator is constant (for more than two periods), positive and high, prices increase and it is better to sell, as when the indicator is constant, negative and low, prices decrease and it’s a good time to buy. This is another key indicator that emphasizes that trading is, basically, mathematics.