Awesome Oscillator

The most important out of all the indicators created by Bill Williams is Awesome Oscillator (AO) integrated into your trading terminal. Its goal is to determine the current momentum on the market, i.e. its driving force which is the 2nd measurement that helps to build a successful trading strategy.

When you open the window of Awesome Oscillator indicator, you will see the histogram with bars which are separated by the zero line (nought line) and changing their colour. The green colour means that, according to the formula, the value of this bar is higher than the value of the previous one and the red colour indicates that it is lower. You should remember one rule that you should buy only when the bar is green and sell only when it is red and not otherwise.

Awesome Oscillator location
Location of the indicator
in the terminal
Awesome Oscillator view
View of the indicator
on the chart

Awesome Oscillator Signals to Enter the Market

Bill Williams offers to remember 3 signals of Awesome Oscillator which allow entering the market:
  • Saucer. To open a long position, you need 3 bars above zero. Let's name them A, B, C. A should be certainly higher than B, i.e. it should be green. B should be red without fail. C is a signal bar, and it should be green. So you will see a small hollow on the histogram. This is the signal which induces to buy. The pending order should be set one point higher the High bar which corresponds to the signal bar. Regarding the signal to buy, it appears as three bars but under the zero line (nought line). In this case A and C are red, and B is green.
  • Nought line crossing. To buy a currency, you need to wait for the appearance of the green bar situated above the zero line (nought line) which was preceded by the red one under this line. If you are looking for the entrance to the short position, then the green bar should be replaced by the red one.
  • Two pikes. Please look carefully at the histogram. For example, you see that the bars have made two pikes between which there is a hollow, and all this is situated above zero. So if the second pike (from left to the right) is closer to the zero line than the first one, this is a signal to sell. It is similar to the signal to buy you are looking for two pikes under the zero line, and the last one should be closer to this line. If you are buying when Awesome Oscillator was above zero and selling when it is under zero, then it is the only signal when you perform oppositely. At this moment you are likely to watch a divergence. For example, you see that the bars are coming up, but Awesome Oscillator is conversely coming closer to the zero line this means that the fifth wave (Elliott waves) and now the price will be corrected, i.e. the movement to the opposite direction from existing one will begin.

Working according to the concept of Bill Williams you should remember that the first signal to any actions is a filled fractal (five bars) outside the Alligators jaws. After its actuation (execution of the placed pending order) you start to look for signals from other measurements. And don't forget the most important you should buy only when the bar is green and sell when it is red.

And also watch the histogram because before the pending order opens the opposite signal can appear any time, and the situation will become unclear. In this case, cancel the order and be ready to exit the market with profit which was made with the help of fractal. In addition to signals, Awesome Oscillator shows you the driving force and allows you to estimate the market situation more clearly, that's why this indicator should certainly take place in the concept of a successful trader.

by JustMarkets, 2017.07.10

Last Articles
All Articles
What is a Market-Neutral Trading Strategy?
A market-neutral trading strategy is an investment strategy that seeks to profit from both increasing and decreasing prices in different securities while minimizing the impact of general market movements.
Read more