Awesome Oscillator Trading Strategy: Day Trading Tips

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. Though no indicator is perfect, having a solid grasp of https://investmentsanalysis.info/ using the Awesome Oscillator can be an incredible advantage against a market that isn’t always sure where it’s headed. Imagine that a trader is analysing the price chart of a stock and notices that the AO value is positive.

On the other hand, a bearish sign is seen when there are two straight green bars where the second one is lower than the initial one. A bullish pattern emerges when there are two straight red bars with the second one being lower than the initial one. The AO saucer signal helps you identify pure momentum continuation trades. In other words, if you miss the boat on a trend signal the Awesome Oscillator saucer will give you a second chance to enter a trend or to simply build up your forex position.

Trading with the awesome oscillator

Our favorite day trading strategy Day Trading Price Action- Simple Price Action Strategy can teach you how to profitably day trade any market. In this particular indicator, the indicator looks at momentum and when that changes. After all, if the momentum in an uptrend is starting to slow down, that could suggest that there is less interest in that financial asset. In the inverse, momentum to the downside will start to slow down before buyers come in and pick the market up or simple short covering happens. However, the Awesome Oscillator is still one of the most widely used and vetted technical analysis tools available today.

Below there and in the Accelerator Oscillator window you can see that the indicator was forming several red bars in that region. You should also notice that the print just above the zero line that formed to green bars was very short in length. For example, if the Accelerator Oscillator is above the zero line and printing green bars, this suggests that it’s going to be easier for acceleration to continue going to the upside.

Awesome Oscillator: An Indicator for New and Experienced Traders

Its signal line is usually the 9-day exponential moving average of the MACD line. The Bill Williams Awesome oscillator strategy is a great strategy 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. This is a more sophisticated way to trade breakouts because breakouts 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. Now, if you’re a day trader and you like being in and out of your trades fast, don’t you worry we’ve got your back.

• Therefore, the strategy, if you want to call it that, calls for a long position when the awesome oscillator goes from negative to positive territory.
• In other words, it takes the difference between the two input moving averages and creates a third moving average representing part of the final equation.
• 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.

While there is no such thing as “the best time frame for scalping,” the time period between one and fifteen minutes is the most prevalent. As a scalping indicator, the Awesome Oscillator assists in capturing asset momentum, especially when combined with other technical indicators. In the above example, AMGN experienced a saucer setup and a long entry was executed. The stock drifted higher; however, we have noticed from glancing at a number of charts, the buy and sell saucer signals generally come after a little pop.

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It uses a center line called a zero line, with prices plotted on either side during the comparisons. 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. Well, the Awesome oscillator indicator’s histogram (see chart below) is derived from the price chart. This histogram is plotted through the central points of the bars (H+L)/2, and subtracted from the 5-period simple moving average, graphed across the central points of the bars (H+L)/2.

Other popular Bill Williams’ indicators include the Accelerator Oscillator, Fractals, Gator Oscillator, Alligator and the Market Facilitation Index. Awesome Oscillator Twin Peaks is the second strategy that should absolutely be tried out by any trader getting to know the indicator. The easiest way of using the Awesome Oscillator is the Zero Line Crossover strategy. This signal is the simplest and least trustworthy of the five techniques discussed in this article.

What Is the Awesome Oscillator?

The Awesome Oscillator is undoubtedly a powerful and versatile tool that should be part of any investor’s toolkit, but it only takes one bad trade to wipe out all of your profits. For contrarian traders, an extremely high Awesome Oscillator reading may come across as a signal for a potential reversal, but this can be a bad way of using the indicator. A buy signal is much stronger when supported by an oversold market, while overbought markets add credence to the oscillator https://trading-market.org/ reporting a sell signal. In cryptocurrency markets, events like a successful protocol upgrade or governance voting systems’ results can positively or negatively affect momentum. The market’s momentum reflects the velocity of price changes, but history has shown that momentum is a much more reliable indicator in rising markets than falling ones. Secondly, if Awesome Oscillator has formed two highs above 0 and the trough between them is also above 0, it’s a bearish signal.

As was previously mentioned, the AO indicator utilizes the 34-bar and 5-bar SMAs in its formula. On the contrary, the MACD indicator employs 26-period and 12-period EMAs and a 9-period Signal Line. MACD may respond quicker than the Awesome Oscillator when exponential moving averages are included, making AO a confirmation indicator. This strategy may be utilized in any time frame, although it is most beneficial in smaller time frames, such as the 1-minute chart.

How to trade using Awesome Oscillator

A bullish saucer can be identified by the Awesome Oscillator positioned above the zero line followed by two consecutive red bars. The second red bar tends to be lower than the first and is followed by a green bar. Traders often try and enter long positions during the third bar or in the red bar immediately preceding it. One of the most reputed and widely-used indicators for tracking market momentum is the Awesome Oscillator. A bullish saucer consists of a red bar, followed by a smaller red bar, followed by a green bar. A bearish saucer consists of a green bar, followed by a smaller green bar, followed by a red bar — all of them should be below 0.

The Awesome Oscillator was developed by the legendary chartist Bill Williams, who described it as the ‘best momentum indicator’ that is ‘as simple as it is elegant’. If you want to rely on more than just the Awesome Oscillator, you are not limited to combining it with other technical indicators available on GoodCrypto. We can conclude that both indicators complement each other https://bigbostrade.com/ in the trading chart. However, according to Williams, there is an even better way to take advantage of the AO and AC. Another distinguishing aspect of the AO oscillator is its reliance on the median price to calculate SMAs. On the other hand, MACD calculations, unlike the Awesome Oscillator, are based on the closing price, which is widely regarded as the most reliable.