What is the Awesome Oscillator?

Bill Williams’s Awesome Oscillator (AO) is a 34-period simple moving average, plotted through the bars’ midpoints (H+L)/2, which is subtracted from the 5-period simple moving average, built across the bars’ midpoints (H+L)/2. 

The Awesome Oscillator shows us quite clearly what’s happening to the market driving force at the present moment.

The Awesome Oscillator indicator is a momentum indicator reflecting the precise changes in the market driving force which helps to identify the trend’s strength up to the points of formation and reversal.

Awesome Oscillator Indicator

The Awesome Oscillator indicator is a histogram and is derived from the price chart.

The Awesome Oscillator histogram is a 34-period simple moving average.

The indicator displays the market momentum of a pre-decided recent number of periods in comparison with the momentum of a large number of previous periods.

How to Calculate Awesome Oscillator using Formula?

The Awesome Oscillator histogram is plotted through the central points of the bars (high + low)/2, which is the median price. Then, it is subtracted from the 5-period simple ma, graphed across the central points of the same bars. Therefore, to calculate the awesome oscillator, we use the following formulae: 

median price= (high + low) / 2AO = SMA(median price, 5)- SMA(median price, 34)

Why use the Awesome Oscillator Trading Strategy?

The Awesome Oscillator is really useful when it comes to technical analysis (TA), as it uses the standard momentum oscillators and adjusts the calculations to rectify any common weaknesses they have.

The AO Trading Strategy is completely effective when it comes to confirming signals are identified by additional TA.

How to Use Awesome Oscillator Trading Strategies?

Bullish Scenario:- 

  • If the value of AO is above zero it is considered a bullish scenario. 
  • If the values grow the bullish trend increases indicating that buyers are strong and the price is likely to go up in the future. 
  • If the value decreases the bullish trend is weakening and might flat out in the future hinting that the prices may go down in the future.

Bearish Scenario

  • If the AO value is below zero then it is considered to be a bearish scenario.
  • If the value decreases further then bearish trend increases indicating more sellers than buyers hinting that prices might decrease in the future.
  • If the value increases mean that the bearish trend is decreasing and the curve might get flat and the prices may up in the future.

Building Awesome Oscillator Strategy on Mudrex

AO indicator can be used to enter/exit if the trend is growing or weakening. A growing trend is when the AO indicator starts to increase from a large negative value and a buy signal can be generated. Similarly, a falling trend is when the AO indicator starts to decrease from a large positive value and can be used to generate a sell signal.

Strategy

  • BUY:- AC indicator[EMA] crosses up (-100) with short period as 5 and long period as 34.
  • SELL:- AC indicator[EMA] crosses down 100 with short period as 5 and long period as 34.
  • Timeframe:- 6H
  • StopLoss:- 10%

Creating on Mudrex

Components:- To create this strategy all we need is 2 indicator blocks, one to buy and one to sell.

For Buying, we will use the following settings:-

For Selling, we will use the following settings:-

Final Strategy:-

Testing

Running on Binance Futures: BTC/USDT with tick interval of 6H yielded an overall profit of 65.69%


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