Instead of directly tracking the difference in market price, the Awesome Oscillator calculates the difference between a long and short-term moving average drawn using each bar’s midpoints. When the price is higher than before, the histogram produces a green bar, and if the price is lower, the histogram creates a red one. The Awesome Oscillator is a great momentum indicator, being easy to use for newer traders while offering a deeper complexity for more experienced traders to dive into.
- Green bars indicate bullish momentum, while red bars indicate bearish momentum.
- However, we know low float movers are a big deal in the day trading community.
- The awesome oscillator saucer is a trading signal that many analysts use to identify potential rapid changes in momentum.
When the (Awesome Oscillator) AO crosses the zero line from above or below (does not matter), this is not a trading signal – we just see the signs of possible bearish or bullish periods. The accelerator oscillator allows users to define positive or negative moments to avoid deals that may turn out to be risky. For example, experienced traders don’t recommend buying assets if the last bar on the current chart is red, or selling assets when the last bar is green. This approach helps them make more efficient decisions when entering or exiting volatile markets. Traders use the Awesome Oscillator in the forex market to generate buying and selling trading signals in trending and reversing markets.
Awesome Oscillator Trading Strategies
Observe how in the example below, the AO is losing momentum while the price of the BTC/USDT pair is increasing. Let’s learn some of the most profitable trading strategies that can be tested out using the oscillator alone. Whether you want to believe it or not, Fibonacci levels play a critical role in defining support and resistance levels when day trading. The index is not one of the more popular indicators, but that does not mean it lacks accuracy. We’re not saying ditch the AO indicator altogether but be prepared to combine the AO with other indicators.
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However, you can find this pattern when day trading literally dozens of times throughout the day. The Saucer method looks for changes in three consecutive bars, all on the same side of the Zero Line. The most straightforward, basic signal generated by the Awesome Indicator is the Zero Line Cross. All information on The Forex Geek website is for educational purposes only and is not intended to provide financial advice. Any statements about profits or income, expressed or implied, do not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed.
Accelerator oscillator vs awesome oscillator
In this regard, whenever the price forms a swing low, this should be visible in the AO histogram as well. Now, let’s move forward to the most important part of this article, the trading rules of the Bill Williams Awesome Oscillator trading strategy. Before we move forward, we must define the indicators you need to trade the Bill Williams Awesome Oscillator strategy and how to use the Awesome oscillator indicator.
The bearish saucer formation predicts a change in price momentum and the entry of that position. There is a zero line in the middle, which serves an important role while using the indicator. The comparison of two distinct moving averages is utilized to depict the price changes on both sides of the zero line. The indicator creates a histogram by plotting the two moving averages’ differences. Anyway, Awesome indicator proved its efficiency for predicting upcoming trend changes even on short time frames and can be successfully combined with other trading tools and indicators. The reason the awesome oscillator indicator works so well with the e-Mini is that the security responds to technical patterns and indicators more consistently due to its lower volatility.
The awesome oscillator formula works from a 34-period simple moving average (SMA) of median prices, which is subtracted from a five-period SMA of median prices. The scalping strategy with Awesome Oscillator helps take advantage of small and quick trading positions in a bullish or bearish market. When trading with the Awesome Oscillator, select the smallest timeframe available to reflect the scalping strategy and open positions that only last for a few seconds or minutes. When traders combine the Awesome Oscillator with an indicator like the Bollinger Bands to indicate the scalping strategy, they are able to enter and exit positions quickly in a trending market. The Bollinger Bands is a technical analysis tool that helps determine if the currency pair prices are relatively trading at a high or low. The bullish market momentum is indicated by green bars on the Awesome Oscillator price chart, while the bearish market momentum is indicated by red bars on the Awesome Oscillator price chart.
When the price direction of an oscillator and asset have inconsistency, this is known as a divergence in day trading. For instance, a divergence happens when the oscillator drops while the asset’s price rises. Some of you might believe that buying whenever it rises above and selling whenever it falls below can be beneficial. It is in theory, but without confirmation, one shouldn’t depend on any single AO indicator. Furthermore, using this strategy in conjunction with other fundamental analyses and indicators is preferred.
The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money. It entails two consecutive green bars (with the second bar being higher than the first bar) being followed by a red bar. This indicator can also be used to identify possible reversal points on the chart. As you’ll see later in the article, you can use the awesome oscillator to create beneficial strategies.
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. To determine the Awesome Oscillator value, the 5-period simple moving average is subtracted from the 34-period simple moving average.
Its values change relative to the zero line, the color of its columns also changes depending on the price dynamics (usually green and red). A bearish twin peak takes place when two green peaks are observed above the zero-line, and similar to its bullish counterpart, is followed by a red bar under the zero-line – the sell signal. You can trade swing lows of a currency pair’s price with the Awesome Oscillator to profit in the falling markets. When the Awesome Oscillator moves below the zero line and makes two consecutive lows, draw a trendline that connects these swing lows to the zero line. Placing a short order or an exit order at the break of the trendline will help you profit from the falling markets.
Our price projection tools and drawing tools allow you to customise your charts in a way that displays your data clearly, so that price action is easier to read and interpret. Learn more about Next Generation’s charting features through our platform tutorials. For example, a https://g-markets.net/ buy signal happens when the histogram goes from the area of negative values to the positive area (crosses the zero level from the bottom up). In this case, a stop-loss should be placed above the high of the price, which corresponds to the first column in the positive zone.
