Awesome Oscillator: Momentum Detection Guide
The Awesome Oscillator measures market momentum using two simple moving averages. Learn how to read histogram colors and saucer signals in CFD trading.
What Is the Awesome Oscillator?
Created by Bill Williams, the Awesome Oscillator (AO) measures momentum by subtracting a 34-period SMA (median price) from a 5-period SMA (median price). The result is a histogram that shows whether momentum is accelerating or decelerating.
Reading the Histogram
- Green bars above zero: Bullish momentum increasing
- Red bars above zero: Bullish momentum decreasing
- Green bars below zero: Bearish momentum increasing (getting more negative)
- Red bars below zero: Bearish momentum decreasing
Trading Signals
- Saucer: Three consecutive bars where the middle is higher (buy) or lower (sell) than the sides — a momentum shift signal
- Twin Peaks: Two peaks (or troughs) on the same side of zero with a pullback between them
- Cross above zero: Bullish trend confirmation
- Cross below zero: Bearish trend confirmation
Practical Use
AO is best used as a confirmation indicator, not a standalone system. Pair it with a trend indicator (EMA, ADX) and use AO for entry timing. The saucer signal is the most reliable — it catches momentum shifts before price reverses.
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Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70-80% of retail investor accounts lose money when trading CFDs. Backtesting does not guarantee future results. Always consider whether you can afford the potential loss of your capital.