How to use ‘Awesome Oscillator’ in trading strategy

How to use ‘Awesome Oscillator’ in trading strategy

First strategy This System was created from the Book “How I Tripled My Money In The Futures Market” by Ulf Jensen, Page 183. The strategy buys at market, if close price is higher than the previous close during 2 days and the meaning of 9-days Stochastic Slow… To find out what the indicators or error codes of your Philips Air Purifier mean, read our article below.

What is AO indicator?

The Awesome Oscillator Indicator (AO) is a technical analysis indicator created by American trader Bill Williams as a tool to determine whether bullish or bearish forces dominate the market. It measures the market momentum with the aim of detecting potential trend direction or trend reversals.

If you look at the candlesticks in the price chart, you can see a smaller green candle right after the third consecutive red candle. This could be a point of worry for many traders if they have entered a short position looking at the awesome oscillator chart. But see the fruit of sticking to your plan and keeping it simple. The price continues to go down after the green candle, which was not complemented by a green bar in the awesome oscillator indicator chart. This underlines the accuracy of Bill Williams’ awesome oscillator indicator. Awesome Oscillator is a histogram consisting of slopes turning from red to green and vice versa.

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The bar is colored green if it is higher than the previous one, and red if it is lower. The bars show the divergence of the 5- and 34-period moving averages. The Detrended Price oscillator is not like other oscillators. Rather it identifies the historical price peaks and troughs. As the name implies, this oscillator eliminates the price trends. The absence of price trends helps to identify overbought and oversold levels more easily.

  • The indicator I want to discuss this week is nothing short of awesome and it is the Awesome oscillator.
  • Rather the trade entries are made when the indicator is just coming out of the oversold or overbought territory.
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  • This article has tried to bring light on them and give an overall outlook on those oscillators.
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It is a lagging or trend-following momentum indicator. This oscillator draws a comparison between two moving averages of the stock. MACD is calculated by subtracting 26 periods’ exponential moving averages from 12 periods of EMA. If AO is used alone, the risks of false signals or their misinterpretation increase. More commonly, AO is used in conjunction with other oscillators and indicators, and also has signal filtering functions.

Heiken Ashi Charts: Identify Trends with Reduced Market Noise

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ao indicator

An additional requirement is that the reversal between the peaks must also be on the same side of the zero line. A bullish twin peaks signal has the peaks below the zero line, for which the second peak must be higher than the first peak. A bearish twin peaks signal is the opposite of this — the two peaks must be above the zero line.

Thus, this indicator helps in detecting early momentum changes. Both look similar in appearance and functioning, but an accelerator oscillator can be called proactive compared to an awesome oscillator. Take a look at the picture above with both price movements and awesome graphs of Reliance industries on a particular day. Pay attention to the circled and the area denoted by the arrow. Does it seem like a good point to enter a long position? But what could have made you able to predict this in not-so hindsight would be the awesome oscillator chart.


Detailed studies will be given on individual oscillators later. This indicator compares the stock’s closing price with the high-low ranges over a specified time, commonly 14 periods. This indicator is similar to the stochastic indicator and is used in the same way.

ao indicator

As the entry signal, we will take the moment when the histogram’s slopes cross the zero level and change colour according to the trade rules. The indicator was developed by the legendary stock market trader Bill Williams. Williams has written many books and publications on technical analysis tools and trading psychology, helping traders around the world formulate successful trading strategies. He has over two decades of experience in trading and teaching market trading.

What do the indicators or error codes on my Philips Air Purifier mean?

Traders also make good use of divergence signals from this oscillator. A positive divergence is equivalent to bullish divergence and indicative of stock accumulation. The accumulation line goes above the center line to indicate a buying opportunity because the stock is being accumulated. The distribution line goes below the center line to indicate distribution.

ao indicator

Awesome Oscillator is an indicator that is a non-limiting oscillator, providing insight into the weakness or the strength of a stock. The Awesome Oscillator is used to measure market momentum and to affirm trends or to anticipate possible reversals. It does this by effectively Mastercard comparing the recent market momentum, with the general momentum over a wider frame of reference. The signals remain valid as long as the price of the underlying security remains in the established range. However, when a price breakout occurs, the signals may be misleading.

Asset Optimization

When the investor sees that the oscillator moves toward the higher value, the investor reads the asset as overbought. In the opposite scenario, when the oscillator trends towards the lower value, the investors consider the asset oversold. The stock price usually continues to rise or fall for some time after the indicator shows an oversold or overbought condition. Therefore, traders do not use these readings for trade.

What is AO indicator?

AO is the short form for the Awesome Oscillator. It calculates the momentum of the price. It calculates the momentum from the difference of 5 SMA and 34 SMA of any stock or commodity.

Similarly, when bullish divergence occurred, the price came out of the bearish trend and started rising. There are several ways to interpret this oscillator. The %K is calculated on a 14-period time span and the %D is a 3-period moving average of %K. When the MACD line goes below the signal line and the histogram goes below baseline, a sell signal is generated. Traders prefer to modify RSI levels to suit their style and market conditions.

Is Ao a leading indicator?

The Awesome Oscillator indicates if bulls or bears are in control of the market. AO is a leading indicator because it tracks the momentum of the market.

The strategy works best when another indicator is used for confirmation as well. An appropriate trading strategy here is to enter a short position to make use of the bearish trend reversal. You could also sell your stocks when they sell signals show up to minimize the loss.

The construction you are looking for is a red bar, followed by a smaller red bar, followed by a green bar. A bearish saucer requires all three bars to be on the negative side of the zero line. The combination needs to be a green bar, followed by a smaller green bar(i.e. less negative in value), followed by a red bar. Awesome Oscillator is an indicator that is non-limiting oscillator, providing insight into the weakness or the strength of a stock. A number of traders have lost their money in the market due to wrong trading advice or emotional decisions. We keep on getting a number of requests for helping these traders recover their lost money.

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