Awesome Oscillator (AO)

◙ Primary Use: Identifying market Momentum

◙ Trading: Taking Advantage of Trading Signals

◙ Standard Settings: 5 and 34 Periods SMAs

Introduction to the Awesome Oscillator

The Awesome Oscillator shows recent market momentum compared to the momentum over a larger number of previous periods. It is an indicator that uses two Simple Moving Averages of median prices. The default settings for the Awesome Oscillator involve two SMAs: a 5-period SMA and a 34-period SMA.

Chart: The Awesome Oscillator on EUR/CAD

 Calculating The Awesome Oscillator

The Awesome Oscillator is calculated by subtracting the 34-period SMA from the 5-period SMA of the median price:

■ Awesome Oscillator = SMA (Median Price of 5 periods) − SMA (Median Price of 34 periods)

Where:

■ Median Price = (High Price + Low Price) / 2

Trading with the Awesome Oscillator

The Awesome Oscillator can generate the following trade signals (source: Oanda.com):

(↑) Trade Signals to Buy:

• The Saucer: Occurs when the bar chart is above the 0-line and changes direction from downward to upward. Specifically, in any three columns, the second is lower than the first and red, and the third is higher than the second and green.

• The Line Crossing: Occurs when the bar chart crosses the 0-line upward—from negative values to positive values.

• Two Pikes: Occurs when a downward-pointing pike below the 0-line (the lowest point) is followed by another downward-pointing pike that is higher (closer to the 0-line). This is the only buy signal that occurs below the 0-line.

(↓) Trade Signals to Sell:

• The Reversed Saucer: The inverse of the saucer signal, appearing concave downward below the 0-line.

• The Reversed Line Crossing: The opposite of the line crossing—where the first bar is above the 0-line and the second falls below it.

• Two Pikes: Signals above the 0-line, with two upward-pointing pikes—the first being higher than the second.

Platform Setup

You can install the 'Awesome Oscillator' directly in MetaTrader-4 or MetaTrader-5:

□ GO TO → INDICATORS → OSCILLATORS → AWESOME OSCILLATOR

□ SETTINGS → 5 AND 34 PERIODS SMAs

■ Awesome Oscillator (AO)

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