As discussed, a bullish crossover occurs when the oscillator crosses above the line, whereas a bearish crossover occurs when the oscillator crosses below the line. On many trading platforms, the awesome oscillator consists of green and red bars or lines. Green bars represent ‘ups’, where the awesome oscillator’s value is greater than the previous bar, and the red bars represent ‘downs’, where the value is lower than the previous bar. There is a zero line in the centre and the bars are plotted based on the calculation of the two moving averages. The below image is from our Next Generation trading platform, where green and red lines are outlined to show ups and downs on a price chart. The Moving Average Convergence Divergence (MACD) is an alternative momentum indicator that traders use when analysing the market.

  1. Also very importantly, the trough between the two peaks, must remain below the Zero Line the entire time.
  2. Positive momentum indicates the potential for a bullish trend, while negative momentum indicates the opposite.
  3. Some of his other indicators include the Bill Williams Alligator, Fractals, the Gator Oscillator and the Market Facilitation Index.
  4. This essentially means that its signals will be wrong a lot of the time, but a divergence can give traders the clarity they need to place their investments in ideal positions, given the right circumstances.

The awesome oscillator twin peaks strategy can be used on both bullish and bearish markets. A bullish twin peak is when there are two peaks in momentum below the zero line. Some traders believe that a green bar after the second peak – which must be higher than the first peak – signifies that there will be a break above the zero line. There are several different awesome oscillator trading strategies to choose from, depending on the current market momentum. Each different awesome oscillator strategy seeks to confirm or disprove trends and determine potential reversal points. In doing so, the awesome oscillator can help a trader to determine when or if they should open a buy or a sell position based on the signals provided by the awesome oscillator.

The awesome oscillator saucer is a trading signal that many analysts use to identify potential rapid changes in momentum. However, the Awesome Oscillator is still one of the most widely used and vetted technical analysis tools available today. While there are bound to be traders who swear against it, with how diverse its range of functions is, it’s safe to say the trading world as a whole would be far worse off without it. For momentum investors, the ride up is the most profitable part of the movement, with prices moving at high velocity and trade volumes soaring through the roof.

If you do see divergence on your trading chart, you may wish to wait for the colour of the awesome oscillator lines to change. The Awesome Oscillator’s signals don’t always reflect the market’s immediate actions, which allows the indicator to detect market divergences – a powerful tool in the hands of any skilled trader or analyst. A divergence occurs when the Awesome Oscillator reports momentum that doesn’t conform with recent price action and can often indicate a reversal or corrective move soon. Bill Williams, the creator of this oscillator, was so famous that some people refer to it as the Bill Williams Awesome Oscillator.

Awesome Oscillator Strategy

Scalping​ is a strategy where traders take advantage of small and frequent price movements within volatile markets, with the aim of making a profit. When placing an awesome oscillator on your trading chart, you can adjust the timeframe to a much smaller period to reflect this scalping strategy. This helps to make the awesome oscillator an effective indicator for scalping, 8 day trading strategies to increase your profitability especially when combined with other indicators, such as Bollinger Bands. The oscillator can provide quick and precise trading signals for the scalper to enter and exit a trade within a matter of moments, giving them potential to profit from a bullish or bearish market. These are particularly rewarding within the forex market, when trading currency pairs.

Predict future price momentum with The Awesome Oscillator

A bullish saucer occurs when the awesome oscillator is above the zero line and there are two red bars, the second being smaller than the first, which is followed by a green bar. A bearish saucer works the other way around, with two green bars below the zero line, the second being smaller than the first, followed by a red bar. In the following article, we are going to take a look at the awesome oscillator indicator. As most of you will know, the English term “awesome” means “great” or “fantastic”. The awesome oscillator is a market momentum indicator which compares recent market movements to historic market movements. It uses a zero line in the centre, either side of which price movements are plotted according to a comparison of two different moving averages.

Awesome oscillator as a divergence indicator

Traders are often advised not to buy if the last bar on the current chart is red, and not to sell if the last bar is green. This can help traders to make better judgements when entering and exiting volatile markets. Though the Awesome Oscillator is most useful in trending markets, it mostly provides weak signals in ranging and consolidating markets.

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As a leading indicator, the Awesome Oscillator can predict future price momentum, which traders can use to determine potential price movements. Still, its signals aren’t always accurate and are actually most useful in confirming trends already caught by other indicators. The trough between both peaks must not break below the zero line, otherwise the signal is invalid. The red bar that proceeds the second peak will serve as a sell signal, at which a trader using this strategy will choose to open a short position. The price chart below gives an example of a bearish twin peak awesome oscillator pattern.

You could also use the awesome oscillator to spot price divergence and to look for trading opportunities when the bars change form red to green and vice versa. The Awesome Oscillator is primarily used by technical analysts for its integration of more standard momentum oscillators while adjusting their calculations to iron out weaknesses. While the indicator often gives reliable signals, it’s always best to confirm using other indicators to minimize risk of loss. It entails two consecutive red bars (with the second bar being lower than the first bar) being followed by a green Bar. When AO crosses below the Zero Line, short term momentum is now falling faster then the long term momentum. This information has been prepared by IG, a trading name of IG Markets Limited.

In terms of signals, the MACD provides traders with signals based on the crossover of its MACD line and signal line, as well as the histogram. The AO provides traders with signals based on the positive and negative values of the indicator, as well as bullish and bearish divergences (as highlighted above). In addition to its simplicity and reliability, the AO can also be used in conjunction with other technical analysis tools to further improve a trader’s market analysis.

As with all technical indicators, awesome oscillator signals are no guarantee that a market will behave in a certain way. Because of this, many traders will take steps to manage their risk when trading with the awesome oscillator. These include using stops and limits on open positions in case a trading signal does not translate to a tangible market movement. Like any trading signal, divergences don’t guarantee any future price action and are taken more as scenarios that have a likelihood of causing the market to behave a certain way. This essentially means that its signals will be wrong a lot of the time, but a divergence can give traders the clarity they need to place their investments in ideal positions, given the right circumstances.

Posted by admin, filed under Forex Trading. Date: May 5, 2023, 11:00 am | No Comments »

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