Awesome Oscillator: A Trader’s Guide
If you're looking for a powerful technical analysis indicator, the Awesome Oscillator is definitely worth considering. Developed by Bill Williams, a renowned trader and author, this indicator compares recent market movements to historical movements and can help traders identify potential shifts in market momentum. In this guide, we'll explore everything you need to know about the Awesome Oscillator and how to use it to your advantage.
What is the Awesome Oscillator?
The Awesome Oscillator (AO) is a technical analysis tool that measures the momentum of a financial asset by comparing the recent price action with the longer-term moving average. It displays the difference between a 34-period and 5-period simple moving average on a chart, using a zero line as a baseline. The Awesome Oscillator aims to identify bullish and bearish trends in the market by plotting price movements above and below the zero line.
How does the Awesome Oscillator Indicator work?
The Awesome Oscillator helps traders determine the strength of a trend and identify potential trend reversals. When the indicator is above the zero line, it indicates that the market is currently in a bullish trend, and when it's below the zero line, it signals a bearish trend. On Finteria binary options trading platform, traders can also use the color-coded bars (green and red) to get a visual representation of the current momentum of the asset. Below is a quick rundown of the Awesome Oscillator indicator with TradingView on Finteria platform:
Click on the ticker’s icon to change the data layout that is more suitable for technical analysis:
Pick the f(x) button to do the technical analysis indicators:
Once clicked, there will appear an indicator menu bar with all functions available on the platform so far:
Voilà! Now we have the Awesome Oscillator performing in our terminal! Here you can see green (bullish) and red (bearish) bars which can help for a better analysis of the market momentum.
Awesome Oscillator: A trading strategy
One of the most common strategies used with this indicator is the Awesome Oscillator Saucer strategy. The Awesome Oscillator Saucer strategy involves looking for a specific pattern of three consecutive bars that are on the same side of the zero line. This pattern is known as a “saucer” and can be either bullish or bearish.
Bullish Saucer
A bullish saucer is identified when the Awesome Oscillator is above the zero line and there are two consecutive red bars, with the second bar being lower than the first. This is followed by a green bar. This pattern suggests that the bears are losing their grip on the market, and that the bulls are starting to take control.
When traders spot a bullish saucer pattern, they may look to enter a long position (buy) either during the third bar or in the bar immediately preceding it – provided that it is also green. Traders may use a stop loss to manage their risk in case the market does not move in the anticipated direction. See below a real case example of a bullish saucer on Finteria platform:
Bearish Saucer
A bearish saucer is identified when the Awesome Oscillator is below the zero line and there are two consecutive green bars, with the second bar being lower than the first. This is immediately followed by a red bar. This pattern suggests that the bulls are losing their grip on the market, and that the bears are starting to take control.
When traders spot a bearish saucer pattern, they may look to enter a short position (sell) either during the third bar or in the bar immediately preceding it – provided that it is also red. Traders may use a stop loss to manage their risk in case the market does not move in the anticipated direction. See below a real case example of a bearish saucer on Finteria platform:
To sum it up:
The Awesome Oscillator is a powerful tool that can help traders identify potential shifts in market momentum. By understanding how to use the indicator effectively, traders can make more informed trading decisions and increase their chances of success in the markets. Keep in mind that like any other technical analysis tool, the Awesome Oscillator should be used in conjunction with other indicators and not relied on solely for trading decisions.
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