What length of period should be used for oscillators to provide overbought and oversold signals?

In technical analysis, oscillators are used to identify momentum and potential reversal points in price trends. The correct choice of period length for oscillators to provide effective overbought and oversold signals is typically based on a fraction of the cycle length of the price movement.

Using a quarter-cycle length allows the oscillator to respond quickly to market movements while still being able to identify extremes in price action. This shorter length enables traders to detect overbought conditions when prices are high relative to recent trading behavior and oversold conditions when prices are low.

When oscillators use a quarter cycle length, they capture the rapid fluctuations of market sentiment, making it easier for traders to act upon potential reversal signals before the market progresses too far in one direction. This approach helps in optimizing the oscillator's sensitivity to changes in momentum, thus providing timely signals.

In contrast, using a half cycle or full cycle length would lead to delayed signals, as these longer periods would take longer to detect significant changes in price momentum. Similarly, 1/10 cycle length may not adequately encapsulate enough data to portray meaningful overbought or oversold readings for practical trading decisions. Therefore, a quarter-cycle length is most effective for generating timely and actionable overbought and oversold signals in oscill