What is the Awesome Oscillator?
Awesome Oscillator (AO)
Forex Trading Glossary
Quick Answer: The Awesome Oscillator is a momentum indicator that compares fast and slow SMAs of median price to highlight shifts in trend strength.
What is the Awesome Oscillator?
The Awesome Oscillator (AO) is a momentum indicator developed by Bill Williams. It subtracts a 34-period simple moving average of median price from a 5-period SMA, plotting the result as a histogram to highlight momentum shifts.
Core Signals
- Zero-line cross: Moves above zero suggest bullish momentum; below zero implies bearish bias.
- Twin peaks: Two consecutive peaks on the same side of zero can foreshadow reversals.
- Saucer pattern: A color change from red to green (or vice versa) within three bars signals momentum swings.
- Divergence: Price making new highs while AO fails to confirm may warn of exhaustion.
Combine with Structure
Use the Awesome Oscillator alongside support/resistance or trendlines. Momentum signals are more reliable when aligned with higher timeframe structure.
Trading Tips
- Mind volatility: Confirm AO signals with volatility tools like ATR.
- Avoid whipsaws: Filter trades by session—AO is less useful during illiquid hours.
- Use stops: Treat AO as a signal generator, not a replacement for risk management.
- Test settings cautiously: Excessive tweaks can overfit the indicator to historical data.
Related Terms
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