Awesome Oscillator: Strategy & Calculation

The bearish saucer pattern, sometimes referred to as the ‘inverted saucer’, is a reliable sell signal and predicts that the market’s slump will probably continue. Based on the information above, the Awesome Oscillator indicator is a promising addition to any trader’s technical analysis arsenal. The only thing that is yet to be covered is what can be the best trading strategy for this indicator. However, this oscillator alone is not enough to get the full insight into the market, so don’t get its signals wrong.

This is a more sophisticated way to trade breakouts because they also signal a shift in momentum. If you’re a fan of breakout trading, we recommend reading the Breakout Triangle Strategy, which will teach you how to correctly trade breakouts. The Bill Williams Awesome Oscillator strategy is a great method if you’re a momentum trader. We’re not looking to catch tops and bottoms, but we seek to enter the market when the momentum has shifted in our favor. Nonetheless, the real shift in sentiment happens once the AO histogram crosses above the zero line, which is why this is our entry signal. However, the Awesome Oscillator tends to give far fewer false signals when compared to other oscillators.

It is also a contrarian technique as one enters short positions when the oscillator is above zero and buys when below zero. The awesome oscillator is a type of technical indicator​​ that was invented by Bill Williams as a method for trading stocks, forex and commodities. He also developed the accelerator oscillator, which works in a similar way to the awesome oscillator.

These days, the indicator can be used for all financial markets, including those mentioned above. Many timeframes can be used to set the awesome oscillator, whether this be minutes (extreme short-term), hours (short-term), days (medium-term) or months (long-term). Hence, the awesome oscillator displayed the market momentum by means of the histogram bars moving relative to the zero line.

CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. Now, you might be familiar with the zero-line crossover signal since this is a common trade signal with many technical indicators. Awesome Oscillator is simple and reliable, which enables traders to measure market momentum and trends. Its ability to be employed together with various analysis tools further uplifts its effectiveness.

1. However, this oscillator alone is not enough to get the full insight into the market, so don’t get its signals wrong.
2. 69% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider.
3. Alternatively, they will open a long position when the awesome oscillator crosses from below to above the zero line.
4. Traders can use the information supplied by the awesome oscillator to forecast market momentum and whether the prevailing trend will continue or reverse.

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. Read on to find out if the awesome oscillator indicator lives up to its name. The accelerator oscillator is another of Bill Williams’ technical indicators, which is calculated as the difference between the awesome oscillator and a 5-period simple moving average.

The awesome oscillator is a technical indicator that is used within the financial markets to confirm or disprove trends on price charts. These charts compare current data to historic data with the aim of predicting momentum in the markets. This can also help to determine whether a current trend is bullish or bearish, and which is more likely to continue or reverse. Consequently, these price movements are displayed on the histogram with two simple moving averages presented and compared.

Simple Price Oscillator Trading Strategies

The most efficient way to use Awesome oscillator is to look for certain patterns or formations on a trading chart. Here are a few commonly used strategies that can be practiced even by beginners. Please, note that when you see a signal with such patterns, it’s recommended to use other trading tools to confirm your assumptions.

Awesome Oscillator = Fast Period – Slow Period

Just like the Awesome Oscillator, the Accelerator Oscillator is also a Bill Williams’ technical momentum indicator. It is calculated as the difference between the Awesome Oscillator indicator and the 5-period simple moving average. It forecasts price changes by measuring the acceleration and deceleration in the market’s momentum, providing an ideal price level to exit or enter a trade. It looks exactly like the Awesome Oscillator, formed with bullish green bars and red bearish bars. While the Awesome Oscillator provides traders with signals about when to enter or exit a trade, the Accelerator Oscillator does not provide any specific trading signal.

Combining with Other Indicators

IG is not a financial advisor and all services are provided on an execution-only basis. This communication is not an offer or solicitation to enter into a transaction and shall not be construed as such. The value of shares, ETFs and ETCs bought through an IG share trading account can fall as well as rise, which could mean best trading journal getting back less than you originally put in. Discover how to increase your chances of trading success, with data gleaned from over 100,00 IG accounts. First, we want to make sure the Awesome Oscillator indicator is below zero. This first rule is part of a three-rule pattern called the Awesome Oscillator Twin Peaks.

As a result, some people will refer to the awesome oscillator as the Bill Williams awesome oscillator. Some of his other indicators include the Bill Williams Alligator, Fractals, the Gator Oscillator and the Market Facilitation Index. Traders will usually open a short position when the awesome oscillator crosses from above to below the zero line. Alternatively, they will open a long position when the awesome oscillator crosses from below to above the zero line.

Trade with the awesome oscillator on our platform

You can also use the awesome oscillator along with double tops and double bottoms from the charts and awesome oscillator window. The information on this website is prepared without considering your objectives, financial situation or needs. Consequently, you should consider the information in light of your objectives, financial situation and needs. The Awesome Oscillator indicator uses inbuilt default settings of 5 vs. 34 periods.

The green and red bars are plotted above and below the zero line on the basis of calculating a fast-moving average and a slow-moving average as their difference. A positive Awesome Oscillator reading indicates that the fast-moving average is more than the slow-moving average and a negative reading implies the opposite. Aside from the above mentioned technical indicators, Bill Williams also developed the Accelerator indicator. It is based on the difference between the awesome oscillator and a 5-period simple moving average. Besides, it helps traders to predict price changes by evaluating acceleration or deceleration of market momentum. For the pattern to be valid, the trough between the two peaks must not break above the zero line.

Accelerator oscillator vs awesome oscillator

Also, lower your expectations about how accurately the oscillator can create price boundaries which a low float will respect. In a related article on Stocktwits Blog [4], see how day trader Dave Kelly describes trading low float stocks and the https://g-markets.net/ level of volatility with these securities. First, if you shorted the opening spike, similar to our Papa John’s example, this would have caused you serious pain. Next, EGY spikes lower giving the impression the stock was going to fill the gap.

Well, guess what happened – Papa John’s peaked at $55.83 before consolidating. Now if you are day trading and using a lot of leverage, it goes without saying how much this one trade could hurt your bottom line. Any short trader would have had enough reason with the negative news on Papa John’s founder at the time to short the morning pop.