Awesome Oscillator
The most important out of all the indicators created by Bill Williams is
Awesome Oscillator (AO) integrated into your trading terminal. Its goal
is to determine the current momentum on the market ie its driving force
which is the 2nd measurement that helps to build a successful trading
strategy.
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When you open the window of Awesome Oscillator indicator you will
see the histogram with bars which are separated by the zero line (nought
line) and changing their color. The green color means that, according
to the formula, the value of this bar is higher than the value of the
previous one and the red color means that it is lower. You should
remember one rule that you should buy only when the bar is green and
sell only when it is red and not otherwise.
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Location of the indicator in the terminal |
View of the indicator on the chart |
Bill Williams offers to remember 3 signals of Awesome Oscillator which allow to enter the market:
- Saucer. In order to open long position you need 3 bars above
zero. Let's name them A, B, C. A should be certainly higher than B ie it
should be green. B should be red without fail. C is a signal bar and it
should be green. So you will see a small hollow on the histogram. This
is the signal which induces to buy. The pending order should be set one
point higher the High bar which corresponds to the signal bar. Regarding
the signal to buy, it appears as three bars but under the zero line
(nought line). In this case A and C are red and B is green.
- Nought line crossing. In order to buy currency you need to
wait for the appearance of the green bar situated above the zero line
(nought line) which was preceded by the red one under this line. If you
are looking for the entrance to the short position then the green bar
should be replaced by the red one.
- Two pikes. Please look carefully at the histogram. For
example you see that the bars have made 2 pikes between which there is a
hollow and all this is situated above zero. So if the second pike (from
left to the right) is closer to the zero line than the first one this
is a signal to sell. It is similarly with the signal to buy you are
looking for 2 pikes under the zero line and the last one should be
closer to this line. If you are buying when Awesome Oscillator was
above zero and selling when it is under zero then it is the only signal
when you perform in the opposite way. At this moment you are likely to
watch a divergence.
For example, you see that the bars are coming up but Awesome Oscillator
is conversely coming closer to the zero line this means that the fifth
wave (Elliott waves) and now the price will be corrected ie the movement
to the opposite direction from existing one will begin.
Working according to the concept of Bill Williams you should remember
that the first signal to any actions is a filled fractal (five bars)
outside the Alligators jaws.
After its actuation (execution of the placed pending order) you start
to look for signals from other measurements. And don't forget the most
important you should buy only when the bar is green and sell when it is
red.
And also watch the histogram because before the pending order opens the
opposite signal can appear any time and the situation will become
unclear. In this case, cancel the order and be ready to exit the market
with profit which was made with the help of fractal. In addition to
signals, Awesome Oscillator shows you the driving force and allows you
to estimate the market situation more clearly, that's why this indicator
should certainly take place in the concept of a successful trader.