The Bill Williams Awesome Oscillator strategy is a momentum strategy that seeks to take advantage of the most immediate trend. This strategy is similar to our Breakout Triangle Strategy because it will only give you entry signals when the momentum is confirming the price action shift.
Our team at Trading Strategy Guides puts a lot of weight in developing strategies that provides you big loss but at the same time small loss. The Bill Williams Awesome Oscillator strategy can be applied across different markets, be it stocks, commodities, indices and Forex currencies. Before we move forward, we must define the indicators you need to trade the Bill Williams Awesome Oscillator strategy and how to use Awesome oscillator indicator.
The Awesome Oscillator indicator is a histogram — that is similar to the MACD indicator — displaying the market momentum of a recent number of periods compared to the momentum of a larger number of previous periods. Now, before we go any further, we always recommend to note down the trading rules on a piece of paper.
First, we want to make sure the Awesome Oscillator indicator is below zero. This first rule is part of a three-rule pattern called the Awesome Oscillator Twin Peaks. Second, you need to check if here are two consecutive swing lows of the awesome oscillator histogram and the second low is higher than the first one.
These two swing will form the twin peaks and from here comes the term Awesome Oscillator Twin Peaks. We need the Awesome oscillator indicator histogram after the second low to immediately turn green. This will validate the Awesome oscillator Twin Peaks pattern. When the AO histogram turns green it indicates buyers stepping in, but only a break above the zero line will signal a real shift in the market sentiment.
As we already learned the Awesome oscillator indicator fluctuates between positive momentum when trading above the zero line and negative momentum when trading below the zero line. This indicates various degrees of momentum strength; however the real shift in sentiment happens once the AO histogram crosses above the zero line which is why this is our entry signal.
At this point your trade is opened, but we still need to determine where to place our protective stop loss and take profit orders, which brings us to the next step of our strategy strategy. The Awesome oscillator histogram should normally align with the price action. In this regard whenever the price forms a swing low this should be visible in the AO histogram as well.
Now, the only component that needs to be clarified is where to take profit, which brings us to the next step of our Bill Williams Awesome oscillator strategy.
We take profit at the earliest sign that the market is showing us the first sign of weakness. In this regard, when the AO histogram post two consecutive red bars we want to close our position and take profit as there is a high probability the market will reverse from thereafter. This is a more sophisticated way to trade breakouts, because breakouts also signal a shift in momentum. The most popular Bill Williams Awesome oscillator strategy is trading theAwesome Oscillator Twin Peaks pattern because most of the times it signals trades with superior risk to reward ratio.
The Bill Williams Awesome Oscillator is extremely powerful…. Whats your experience with using this indicator? If you never have used this in your trading before try this strategy out and let us know what your results were! Thanks for the article, I think this could be a powerful strategy that could get some really big wins. Now… Before we move forward, we must define the indicators you need to trade the Bill Williams Awesome Oscillator strategy and how to use Awesome oscillator indicator.
The only indicator you need is the: What about the indicator setting? The Awesome Oscillator indicator uses inbuilt default settings 5 vs. So, how does it work? Check if the Awesome oscillator indicator is below zero First, we want to make sure the Awesome Oscillator indicator is below zero. This brings us to the next rule. There is one more rule for the Awesome oscillator Twin Peaks pattern to be validated. Here you go… Step 3: Check if the Awesome Oscillator Indicator histogram after the Second Low is Green We need the Awesome oscillator indicator histogram after the second low to immediately turn green.
Wait for the Awesome Oscillator Histogram to Break Above the Zero Line Before Buying at the Current Market Price As we already learned the Awesome oscillator indicator fluctuates between positive momentum when trading above the zero line and negative momentum when trading below the zero line. Thank you for reading! Nice explanation, keep it your good work. We will do our best to help every trader find a strategy that works for them….
There is a typo error in the articule. It was mentioned as big loss instead of big profit. It would be awesome if you can thanks.More...