Awesome Oscillator is one of the most famous indicators developed by Bill Williams. Unlike the slow stochastic, which oscillates between the +100 to -100, the Awesome Oscillator is boundless. This indicator is a basic calculation of the two simple moving averages, and it gauges the current driving forces of the market. This is done by comparing the recent market momentum, with the general momentum over a wider time frame.
Awesome Oscillator is a 34-period simple moving average, plotted through the central points of the bars, and subtracted from the 5-period simple moving average, graphed across the central points of the bars.
Awesome Oscillator = SMA (MEDIAN PRICE, 5) – SMA (MEDIAN PRICE, 34)
Where Median Price = (H+L)/2,
H & L – The highest and lowest prices of the bars
SMA – Simple Moving Average
How to install ‘Awesome Oscillator’ in MT4 (Step-by-step process)
Meta trader 4 comes with a package of the 30 indicators, and the Awesome Oscillator is one of these standard indicators. This indicator can be found in MT4 under ‘Bill Williams’ folder. To plot this indicator to your charts in MT4, follow the below steps.
Open the MT4 terminal Click on the Insert > Indicators > Bill Williams > Awesome Indicator.
The image below shows an hourly EUR/USD chart with the Awesome Oscillator histogram plotted beneath.
Awesome Oscillator Trading Strategies
Twin Peaks Strategy
The first thing we need to check to implement this strategy is to see if the Awesome Oscillator is below the zero value. Only then this strategy can be implemented.
See if the Awesome Oscillator is displaying two consecutive swing lows, where the second low is higher than the first one.
In the image below, two low swings formed twin peaks and hence the name Twin Peaks Strategy.
The next check is to see if the Awesome Oscillator histogram after the second low is Green in colour. This will validate our twin peaks pattern. If the histogram is green, it indicates that the buyers are stepping in the market. The break above the zero line signals a real shift in the market.
The Awesome Oscillator shows a positive momentum when it is trading above the zero-line and shows a negative momentum when trading below the zero-line. You need to wait for the Awesome Oscillator histogram to break above the zero-line, to get the ‘buy’ signal.
Once all the rules of our strategy are met, we need to decide where we put our Stop Loss and Take Profit orders.
Always remember to place your Stop Loss order below the recent swing of the Awesome Oscillator.
When the Awesome Oscillator displays two consecutive Red bars, it is a signal for us to close our trade as there is a high probability of market reversal.
Bullish and Bearish Saucer Strategy
For this strategy to implement, the Awesome Oscillator should be above the zero-line (bullish zone). In a trending market, the AO should print one or two Red lines and then 2 Green lines in order to place a ‘buy’ order.
In the image below, the indicator was above the zero-line. Then we have a couple of Red lines accompanied by two Green lines on the histogram. This is a strong ‘buy’ signal for us.
We suggest you place your Stop Loss order below the recent low and Take Profit order at the recent high.
If the Awesome Oscillator is below the zero-line, it means the market is in the bearish zone. In a trending market, the AO should print one or two Green lines followed by 2 Red lines in order to place a ‘sell’ order.
In the image below, the indicator is below the zero-level. Also, it printed two Green lines, followed by two Red lines. This is a strong ‘sell’ signal for us.
Place the Stop Loss orders above the recent high and Take Profit orders at the recent low. If there is no recent low for you to place the Take Profit order on your trading timeframe, then choose a higher timeframe.
The Awesome Oscillator is an important tool for traders as it gives a deep insight into the market. It identifies the current driving force of the market, which makes it valuable and unique. If you are a momentum trader, then Bill William’s Twin Peak strategy is just for you. No matter which strategy you use, don’t forget to place your Stop Loss and protect your profits. We recommend you to pair this indicator with candlestick pattern, or any other indicators to generate more accurate trading signals.