How Awesome Oscillator works
The Awesome Oscillator is useful to traders as it produces the following trade signals:
- A sell position if the AO goes below the zero line and forms a peak;
A buy position if the AO goes above the zero line and forms a gap
- A sell position if the AO creates 2 peaks above the zero line in which the second peak is lower than the first peak;
A buy position if the AO frames two lows below zero with the second low not below than the first one.
- A sell position if the AO crosses the zero line from up going down;
A buy position if the AO crosses the zero line from down going up.
Awesome Oscillator Trading Strategy
Awesome Oscillator’s mechanism projects three main signals. These are:
- Saucer – This signal is characterized by forming three columns over the nought line: 2 color red columns and 1 green column. Between the first two red columns, the second one is usually lower than the first red column. The green column goes higher than the second red column. When a saucer is projected, it indicates a ‘buy’ signal, while an inverted version of this formation indicates a ‘sell’ signal.
- Nought Line Cross – This formation is observed when the histogram crosses the nought line taking the upward direction which signifies a change in value (negative to positive). This projection indicates a ‘buy’ signal while the reversed formation indicates a ‘sell’ signal.
- Two Pikes – This formation can be traced when two pikes are projected below the nought line and the second pike is closer to level zero than the first pike. This is a signal for a ‘buy’. The reverse formation or pattern indicates a ‘sell’ signal.
Awesome Oscillator is a 34-period simple moving average, projected through the central points of the bars (H+L)/2, and subtracted from the 5-period simple moving average, formed across the central points of the bars (H+)/2.
Median Price = (High + low) /2
AO = SMA (Median Price, 5) – SMA (Median Price, 34)
SMA – Simple Moving Average