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Awesome Oscillator Definition
Awesome Oscillator (AO) 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.

How to Use Awesome Oscillator Indicator in Forex Trading
There are three main signals which may be seen:

Saucer – three consecutive columns above the nought line the first two of which must be colored red (the second one is lower than the first one) while the third one is colored green and higher than the previous (second) one. Such a formation would be a clear Buy signal whilst inverted and vertically flipped formation would serve as a Sell signal.
Nought line crossing – the histogram crosses the naught line in an upward direction changing its values from negative to that of positive ones. In this situation we have a Buy signal. The Sell signal would be a reversed pattern.
Two pikes – the indicator displays a Buy signal when the figure is formed by two consecutive pikes both of which are below the naught line and the later-formed pike is closer to the zero level than the earlier-formed one. The Sell signal would be given by the reverse formation.
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Awesome Oscillator Trading Strategy
Awesome Oscillator Strategy includes 3 ways of trading. The first way is to open a sell position when the oscillator is below the zero line forming a peak, and open a buy position when the oscillator is above the zero line forming a gap.

Another way is to open a sell position when the oscillator forms two peaks above the zero line, where the second high is lower than the previous one. And, conversely, traders watch to open a buy position when the oscillator forms to lows below the zero line with the last one not as low as the previous one.

The third way is to account crossing the zero line. When the oscillator crosses it from up to down, it is time to open a sell position and when it crosses from down to up, it is time to open a buy position.

Awesome Oscillator Formula (Calculation)
Awesome Oscillator is a 34-period simple moving average, plotted through the central points of the bars (H+L)/2, and subtracted from the 5-period simple moving average, graphed across the central points of the bars (H+L)/2.

MEDIAN PRICE = (HIGH+LOW)/2

AO = SMA(MEDIAN PRICE, 5)-SMA(MEDIAN PRICE, 34)

 

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Alright, let’s break down the Awesome Oscillator—because, honestly, the name alone makes it sound cooler than it probably has any right to be. If you’re hanging around in Forex circles, you’ve definitely run into it. Bill Williams whipped this thing up to help folks spot when the market’s really moving or just sort of loafing around. Basically, it shows you if the current price action has some real muscle behind it or if it’s running out of steam. And the trick is, it doesn’t just look at the closing price like so many other indicators. Nope. The AO goes for the median price—the average of high and low—instead. Gives you a little more “real talk” from the market, less of the noise.

Here’s, in plain English, how you actually get this puppy working:

1. Take the high and low for every candlestick and average 'em.
Median Price = (High + Low) / 2. Not rocket science.
2. Now, slap two simple moving averages (SMAs) on that. One is a quick one (5 bars, blink and you’ll miss it), and the other’s a 34-bar slowpoke.
3. Subtract the long boi from the short one:

AO = 5-period SMA (Median Price) – 34-period SMA (Median Price)

You stick this formula on your chart, and voilà—a little colored histogram pops up, looking all official and mysterious. But what’s it actually saying? Well, when the short average sits above the long one, momentum’s picking up. When it drops beneath, things are slowing down, or reversing—think of it like your car tapping the brakes.

Now, what do you actually do with all these colorful bars? Traders have cooked up a few classic moves:

1. The Saucer
This isn’t breakfast—it’s literally three bars above zero: first two go red and dip lower, third turns green and climbs. Crowd goes wild: that’s a buy signal. Mirror the pattern under zero, it flips, and now you’re looking to sell. Easy.

2. Zero Line Crossing
Watch the histogram flip from negative to positive. If it crosses above zero, you’ve got momentum building. Time to consider buying. Slipping from positive to negative? Might want to bail, or even flip to a short.

3. Twin Peaks
No, not the show, sorry. This is spotting two “peaks” below (or above) the zero line. For a buy: see two dips below zero, and the second one’s not as deep—momentum’s coming back. Sell signal’s the reverse: twin hills above zero, second one’s shorter than the first—momentum starting to sag.

There are a ton of little trading hacks with AO, honestly. Some folks do the whole “peak and gap” routine—basically, if the histogram jumps a gap above zero, you might buy, or sell if it dives below zero. Others are straight-up obsessed with the zero-line crosses (guilty as charged). There’s so much noise in Forex, but this tool at least gives you a neat visual cue when the party’s starting—or crashing.

Why bother? Well, unlike a lot of indicators that’ll just leave your chart looking like a Jackson Pollock painting, AO keeps it simple and idiot-friendly. No squinting at a million lines. It just shows you: is momentum fading, or about to kick off? Plus, even beginners can look like pros flaunting those colorful histograms.

Bottom line: whether you’re a total newbie or a grizzled chart vet, the Awesome Oscillator’s worth having in your toolbox. Keeps you ahead—maybe not psychic, but hey, anything that helps catch a trend before your buddy Steve does... that’s a win.