Developed by Stephen J. Klinger to help in both short- and long-term analysis, the Klinger Oscillator measures trends of money flows based upon volume.

The KO is derived from three types of data: the high-low price range, volume, and accumulation/distribution. Price range is a measure of movement and the force behind that movement is volume. Accumulation is when the sum of today's [high]+[low]+[close] is greater than yesterday's. Distribution is when today's sum is less than the yesterday's. When the sums are equal, the existing trend is maintained.

Volume produces continuous intraday changes in price as it reflects buying and selling pressure. The KO quantifies this difference between the number of shares being accumulated and distributed each day as "volume force." A rising volume force should accompany an uptrend. It should 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 be tracked. Comparing this force to price action can help identify divergences at tops and bottoms.

The KO works well for timing trades in the direction of the trend but can be less effective when going against a trend. However, when the KO diverges from the underlying price action, the observed trend may be losing momentum and nearing its completion.

Klinger notes the most important signal occurs when the KO diverges with the underlying price action, especially on new highs or new lows in overbought/oversold territory. A stock achieving a new high or low for a cycle with the KO failing to confirm this shows a trend that may be losing momentum and is nearing completion.

If the price is in an uptrend (above an 89-day exponential moving average), buy when the KO drops to unusually low levels below zero, turns up, and crosses its trigger line. If the price is in a downtrend (i.e., below an 89-day exponential moving average), sell when the KO rises to unusually high levels above zero, turns down, and crosses its trigger line.