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Straight off of the Metastock help section of the indicator:
The Klinger Oscillator (KO) was developed by Stephen J. Klinger. Learning
from prior research on volume by such well-known technicians as Joseph
Granville, Larry Williams, and Marc Chaikin, Mr. Klinger set out to develop
a volume-based indicator to help in both short- and long-term analysis.
The KO was developed with two seemingly opposite goals in mind: to be
sensitive enough to signal short-term tops and bottoms, yet accurate enough
to reflect the long-term flow of money into and out of a security.
The KO is based on the following tenets:
· Price range (i.e. High - Low) is a measure of movement and volume is the
force behind the movement. The sum of High + Low + Close defines a trend.
Accumulation occurs when today's sum is greater than the previous day's.
Conversely, distribution occurs when today's sum is less than the previous
day's. When the sums are equal, the existing trend is maintained.
· Volume produces continuous intra-day changes in price reflecting buying
and selling pressure. The KO quantifies the difference between the number
of shares being accumulated and distributed each day as "volume force." A
strong, rising volume force should accompany an uptrend and then gradually
contract over time during the latter stages of the uptrend and the early
stages of the following downtrend. This should be followed by a rising
volume force reflecting some accumulation before a bottom develops.
· By converting the volume force into an oscillator representing the
difference between a 34-period and 55-period exponential moving average with
a 13-period trigger, the force of volume into and out of a security can
easily be tracked. Comparing this force to price action can help identify
divergences at tops and bottoms.
J.
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