Trend & directionForecast Oscillator · FOSC
Tushar Chande's oscillator of the gap between price and its linear-regression forecast, expressed in percent.
Works best in trending marketsEngine-computed on a fixed sample series
What it is
The Forecast Oscillator, developed by Tushar Chande, measures the gap between where price actually is and where a statistical trendline says it should be, expressed as a percentage. It is built on the Time Series Forecast — the value predicted by a least-squares regression line fitted to recent prices — and it tells you how far the current close has strayed above or below that forecast. For a beginner, imagine drawing the best-fit straight line through the last few weeks of price and asking, is price above or below what that line predicts, and by how much — the Forecast Oscillator is the answer as a percentage. It answers whether price is running ahead of, behind, or in line with its own recent trend. Positive readings mean price is above the regression's expectation, negative readings below it.
How it is calculated
The engine underneath is linear regression: over a chosen lookback, a least-squares line is fitted to the closing prices, and its projected endpoint value is the Time Series Forecast for the current bar. The Forecast Oscillator is then the difference between the actual close and that forecast, divided by the close and multiplied by one hundred to put it in percentage terms — in words, the percentage by which price is above or below its regression forecast. A positive value means the close sits above the line the regression drew through recent prices; a negative value means it sits below. Because the underlying regression is refitted each bar over the lookback window, the forecast adapts as new prices arrive. Some implementations also plot a moving-average trigger line of the oscillator to smooth its crossings.
Reading it, step by step
The zero line is the forecast itself, so a reading of zero means price sits exactly on its regression line, and crossings of zero mark price moving from one side of the trend line to the other. Sustained positive readings indicate price is consistently holding above its regression forecast, the signature of a healthy uptrend, while sustained negative readings indicate a downtrend. A cross back through zero can flag a stall or an incipient reversal as price returns to and through its own trend estimate. Divergence is also informative — if price makes a new high but the oscillator makes a lower high, price is stretching less far above its forecast than before, hinting the trend is tiring. The oscillator is best read alongside the underlying Time Series Forecast line itself for context, since the percentage gap means more when you can see the regression it is measured against.
Best timeframes and settings
The Forecast Oscillator depends heavily on the regression lookback, and common defaults run around 5 to 14 periods depending on the platform. A shorter lookback makes the regression hug recent price, so the oscillator is responsive but noisy and crosses zero frequently; a longer lookback smooths the regression, so the oscillator lags but gives cleaner, more meaningful crossings — the central responsiveness-versus-noise trade-off. It can be applied to any timeframe, but like most regression tools it is most coherent on daily and swing-trading charts where trends develop with some order. Because it is a percentage measure, its meaningful extremes vary by instrument and by volatility, so there is no universal overbought or oversold line. Matching the lookback to your holding period — shorter for active trading, longer for position work — is the main setting decision.
When and where to use it
The Forecast Oscillator is a trend tool at heart, most useful in trending markets where price persistently leads or lags its regression and the zero-line crossings carry directional meaning. It suits liquid instruments with orderly trends across equities, futures, and forex. In a choppy, sideways market the regression flattens and the oscillator flips back and forth across zero, producing frequent, low-value crossings, so it is weaker there. It is also sensitive to sudden shocks, which can whip the regression around. Use it to confirm and monitor the health of a trend and to flag when price is diverging from its own trend estimate, rather than as a mean-reversion oscillator with fixed extremes.
Strategies that use it
The primary strategy is the zero-line crossover traded in the direction of the trend: go long when the oscillator crosses above zero while the broader trend is up, and short when it crosses below zero in a downtrend, using the crossing as a timing trigger for a trend already identified. A second strategy trades divergence — when price makes a new extreme but the oscillator fails to confirm with a matching extreme, you anticipate a stall and tighten stops or prepare to fade. A third uses the oscillator against its own moving-average trigger line, entering when the oscillator crosses its trigger, which smooths out some of the zero-line noise. In each case the Forecast Oscillator works best read together with the underlying Time Series Forecast line, which provides the visual trend context the percentage alone lacks.
Combining it with other indicators
Because the Forecast Oscillator measures a trend relationship, it pairs well with an independent trend filter such as a longer moving average or the ADX, which confirms whether the regime justifies trading its crossovers. Momentum tools like the RSI or MACD corroborate the divergences the oscillator flags, turning a single warning into a stronger combined signal. Support and resistance or Fibonacci levels give price context for where a zero-line cross is occurring. The Time Series Forecast line and the least-squares moving average, its close relatives, are natural companions that display the very regression the oscillator quantifies. Avoid pairing it with another regression-derived oscillator, which would echo the same information; the useful partners add momentum, volume, or structure that regression alone does not capture.
Where it fails
The oscillator is highly sensitive to the lookback length, so a poorly chosen period makes it either a jittery noise generator or a laggard that confirms turns far too late. In sideways markets it whipsaws across zero repeatedly, producing a stream of false crossovers, because a flat regression means price is constantly flicking from just above to just below it. Being a percentage measure, it has no universal extreme levels, so importing an overbought or oversold threshold from another instrument is a mistake. Sudden gaps or shocks can distort the regression and throw off the reading for several bars. The defences are to tune the lookback to the timeframe and confirm the regime is trending, treat zero-line crossings as timing within a trend rather than stand-alone signals, and read the oscillator alongside its underlying forecast line rather than as an abstract number.
A worked example
Suppose a stock is in a steady uptrend, and over the last 14 bars a least-squares regression line fitted to its closes projects a Time Series Forecast of 99.50 for today, while the actual close comes in at 101.00. The Forecast Oscillator is (101.00 minus 99.50) divided by 101.00, times one hundred, which is about plus 1.49 percent — price is running roughly one and a half percent above its regression forecast, confirming healthy upward momentum. For several weeks the oscillator has held firmly positive, keeping you comfortably long. Then price pushes to a marginal new high, but the oscillator prints only plus 0.6 percent, a lower high than its earlier plus 1.49 percent, a bearish divergence showing price is stretching less far above its own trend line than before. When the oscillator subsequently crosses down through zero, signalling the close has fallen back onto and through its regression forecast, you take that as a cue to exit the long or tighten your stop, having been warned by the divergence that the trend was losing its lead over its own forecast.