The Awesome Oscillator indicator is a trading momentum indicator that compares the current market movement with previous trading movements. This indicator has a zero line at its midpoint, while at which point the price is drawn will be adjusted based on the comparison between two different Moving Average indicators.
Traders can use the information provided by the Awesome Oscillator indicator to forecast market momentum as well as predict whether the current trend will continue or reverse. If the Awesome Oscillator indicator is above the zero line, then the current market momentum can be assumed to be bullish. We recommend that if the Awesome Oscillator indicator is below the zero line, then the current market momentum is assumed to be bearish.
The gold price chart below is an example of the Awesome Oscillator indicator, and an illustration of how this indicator can be used to chart the momentum of the gold price movement, especially when the Awesome Oscillator indicator is above and below the zero line. Green bars in the indicator indicate bullish momentum, while red bars indicate bearish momentum.
Just like other technical indicators, the signals generated by the Awesome Oscillator indicator do not guarantee that the market will move 100% according to the signals generated. Therefore, many traders will look for ways to manage trading risk when using the Awesome Oscillator indicator. One way to manage this risk is to use a stop loss, or limit the loss of each transaction.
Awesome Oscillator Formula
The number that appears on the Awesome Oscillator indicator is the result of the subtraction between the 34 period Simple Moving Average (SMA) and the 5 period SMA applied to the median price. This indicator can be used on any time frame, from minutes, hours or days. While in use, and as part of the Awesome Oscillator trading strategy, many traders also include the SMA indicator to assess current market trends.
The formula for calculating the Awesome Oscillator above is just additional knowledge for you, it doesn't mean you have to calculate it manually every time you make a trade. Even better, many trading platforms today - including the MetaTrader 4 trading platform SOEGEE FOREX.com - will automatically draw the Awesome Oscillator indicator, so you just have to focus on how to use it.
Awesome Oscillator Gold Trading Strategy
There are various Awesome Oscillator Gold Trading Strategies that you can choose from, and you use them according to the current market momentum. Each Awesome Oscillator strategy that we will discuss later seeks to confirm or refute the trend and determine potential trend reversal points. Thus, Awesome Oscillator can help traders to determine when or whether they should open a buy or sell position based on the signals provided by the Awesome Oscillator indicator.
Awesome Oscillator Saucer
Awesome Oscillator Saucer is a trading signal used by many analysts to identify potential rapid changes in momentum. The saucer strategy seeks to find a change in three consecutive bars that are on the same side of the zero line.
Awesome Oscillator Saucer can be a bullish or bearish signal. Bullish saucer can be identified when the awesome oscillator is above the zero line and there are two consecutive red bars - where the second bar is lower than the first - which is then followed by a green bar.
On the other hand, a bearish saucer can be identified by two consecutive green bars below the zero line – where the second bar is lower than the first – which is then followed by a red bar.
Many traders will attempt to open a long position during the third bar or even when the third bar first appears - as long as the bar is green. Meanwhile, to minimize risk, many traders will place a stop loss at the lowest point when they open the long position.
Awesome Oscillator Twin Peak
The awesome twin peak oscillator strategy can be used in both bullish and bearish markets. A bullish twin peak is when there are two peaks of momentum below the zero line. Some traders believe that the green bar after the second peak - which should be higher than the first peak - indicates that there will be a break above the zero line.
For the pattern to be valid, the valley between the two peaks must not break above the zero line. The green bar will often serve as a buy signal, with traders trying to follow the upward momentum in search of profit. The price chart below is an example of the Awesome Oscillator Twin Peak.
A bearish twin peak is when there are two peaks consisting of a green bar above the zero line. For a signal to be considered valid, a bearish twin peak is when the two peaks consisting of a green bar are above the zero line, and are then followed by a red bar as a bearish signal.
The valley between the two peaks must not penetrate below the zero line. If that happens then the signal becomes invalid. The red bar that will be at the second peak will serve as a sell signal, where most traders using this strategy will choose to open short positions.
On the other hand, rising twin peaks are when there are two peaks consisting of red bars below the zero line. For a signal to be considered valid, a rising twin peak is when the two red bar peaks are below the zero line, and then followed by a green bar as a rising signal.
Zero Line Crossover
A bullish zero line crossover is when the awesome oscillator indicator moves from below the zero line to above the zero line, while a bearish zero line crossover is when it moves from above the zero line to below the zero line. If you see movement as described earlier, this indicates a potential trend reversal.
Traders will usually open short positions when the awesome oscillator indicator crosses below the zero line. Or conversely, the trader will open long positions when the awesome oscillator indicator crosses above the zero line.
For bearish zero line crosses, traders also generally look for further confirmation by looking for three or more red bars before opening a short position; while for a bullish zero line crossover, traders usually look for a series of three green bars before opening a long position.
Ready Bill Williams?
Bill Williams is a well-known technical trader and analyst who created the Awesome Oscillator indicator. Therefore, some people will refer to the Awesome Oscillator indicator as the Bill Williams Awesome Oscillator. Several other indicators that were also created by Bill Williams include the Alligator, Fractals, Gator Ascillator, and Market Facilitation Index.
Many of the Bill Williams oscillator indicators can be used in a variety of markets including stocks, forex, commodities and indices. Like the excellent oscillator, other indicators created by Williams are also used to confirm or reject trends and determine potential reversal points.
Awesome Oscillator Overview
Awesome oscillator is an indicator of market momentum.
The amazing oscillator can give traders buy or sell signals based on what the indicator bars are showing and depending on the pattern shown.
Three popular patterns or strategies used with awesome oscillators include plates, twin peaks, and zero line crossovers - all of which can provide bullish or bearish signals.
The creator of the awesome oscillator, Bill Williams, has also developed other indicators that traders may find useful, including the Bill Williams Alligator and Fractals.