Awesome Oscillator (AO): Forex Technical Indicator
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.
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.
Awesome Oscillator (AO) 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)
SMA — Simple Moving Average.