It can be difficult to understand the many trading indicators available, but the Awesome oscillator simplifies the process and offers great effectiveness. This article explores how the indicator works, its settings and three strategies for using it across all asset types.
Amazing Oscillator – a Simple Guide
Bill Williams developed the Awesome Oscillator to measure market trends. It calculates the difference in a 34-period moving average and a 5 period simple moving (SMA) plotted at the midpoint of the price bar ((High+Low/2)). The AO crossing above the zero-line typically indicates bullish momentum. Conversely, a movement below the zero-line indicates bearish momentum.
The Awesome Oscillator, unlike many other indicators, generates histograms that are colour coded: green for increasing and red for decreasing. A series green histograms can indicate a strengthening trend, while a succession of red histograms indicates a developing downtrend. The AO is a simple and visual tool that traders can use to determine when they should enter and exit a trade.
It is particularly useful in spotting trend reversals and divergences. Its versatility…