Without going into too much detail, this sounds like a basic 3 candlestick reversal pattern that continues in the direction of the primary trend. To trust an indicator blindly without any other confirming analysis is the quickest way to burn through your cash. The one item to point out is that the color of the bars printed represent how the awesome oscillator printed for a period. Hence, you can have a green histogram, while the awesome oscillator is below the 0 line. One point to clarify, while we listed x in the equation, the common values used are 5 periods for the fast and 34 periods for the slow. The index is not one of the more popular indicators, but that does not mean it lacks accuracy.
Whether you want to believe it or not, Fibonacci levels play a critical role in defining support and resistance levels when day trading. Shifting gears to where the awesome oscillator is likely to give you more consistent signals – the futures markets. If you are a contrarian trader, a high value in the AO may lead you to want to take a trade in the opposite direction of the primary trend. So, to this point, let’s walk through a few examples where the trusted awesome oscillator indicator will have you on the wrong side of the trade. In this example the cross down through the uptrend line happened at the same time there was a cross of the 0 line by the AO indicator. After the break, the stock quickly went lower heading into the 11 am time frame.
- Using the Awesome Oscillator is far from a foolproof strategy against the market, but sometimes analyzing these discrepancies can offer more profound insight.
- These include using stops and limits on open positions in case a trading signal does not translate to a tangible market movement.
- The twin peaks strategy is also quite versatile and applicable to both bullish and bearish markets.
You, however, reserve the right to use whatever periods work for you, hence the x in the above explanation. Saucers can be either bullish or bearish, depending on their position with respect to the zero-line. Twin Peaks is a method which considers the differences between two peaks on the same side of the Zero Line. The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView.
Trading Strategies Using the Relative Vigor Index
The below price graph has an example of the awesome oscillator indicator and how it maps market momentum above and below the zero line. Green bars indicate bullish momentum, while red bars indicate bearish momentum. The awesome oscillator is a market momentum indicator which compares recent market movements to historic market movements. It uses a zero line in the centre, either side of which price movements are plotted according to a comparison of two different moving averages.
A bullish twin peak is when there are two peaks in momentum below the zero line. Some traders believe that a green bar after the second peak – which must be higher than the first peak – signifies that there will be a break above the zero line. By comparing recent market momentum with the general momentum over a wider time frame, the Awesome Oscillator provides traders and analysts with a convenient picture of the market’s mindset. Though the Awesome Oscillator is most useful in trending markets, it mostly provides weak signals in ranging and consolidating markets. As a leading indicator, the Awesome Oscillator can predict future price momentum, which traders can use to determine potential price movements.
IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. There were still a few signals that did not work out, so you will need to keep stops as a part of your trading strategy to make sure your winners are bigger than your losers.
As a result, some people will refer to the awesome oscillator as the Bill Williams awesome oscillator. Some of his other indicators include the Bill Williams Alligator, Fractals, the Gator Oscillator and the Market Facilitation Index. Traders will usually open a short position when the awesome oscillator crosses from above to below the zero line. Alternatively, they will open a long position when the awesome oscillator crosses from below to above the zero line.
Bullish Twin Peaks
Now if you are day trading and using a lot of leverage, it goes without saying how much this one trade could hurt your bottom line. Any short trader would have had enough reason with the negative news on Papa John’s founder at the time to short the morning pop. In addition, the AO was spiking like crazy and the rally did appear sustainable. Going back to the crossing of the 0 line, what if we could refine that a little to allow us to filter out false signals, as well as buy or short prior to the actual cross of the 0 line.
The trough between both peaks must not break below the zero line, otherwise the signal is invalid. The red bar that proceeds the second peak will serve as a sell signal, at which a trader using this strategy will choose to open a short position. The price chart below gives an example of a bearish twin peak awesome oscillator pattern. The awesome oscillator twin peaks strategy can be used on both bullish and bearish markets.
Basic Awesome Oscillator Trading Strategies
Just like when a train accelerates from standstill to its top speed, the train will continue to move even after it stops accelerating before decelerating back to a halt. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money. Many of Bill Williams’s oscillators and indicators can be used on a range of markets including stocks, forex, commodities and indices.
These hidden divergences occur when the momentum and price action broadly correlate, but not at every stage. For example, a hidden bullish divergence occurs when the price makes a higher low, but the indicator’s low continues falling. Williams’ other indicators were also created to confirm or invalidate trends and define reversal points ahead of time, but none of them are as widely applicable as the Awesome Oscillator. Williams was also an author of books on psychology, technical analysis, chaos theory, and trading in different markets. The positive or negative difference is then plotted over a zero line, but there are numerous factors beyond just price that can affect market momentum. The awesome oscillator saucer is a trading signal that many analysts use to identify potential rapid changes in momentum.
However, you can find this pattern when day trading literally dozens of times throughout the day. This 5-minute chart of Twitter illustrates the main issue with this strategy, which is that the market will whipsaw you around like crazy. Choppy markets plus oscillators equal fewer profits and more commissions. Now that we are all grounded on the awesome oscillator, let’s briefly cover the 4 most common awesome oscillator strategies for day trading. Depending on your charting platform, the awesome oscillator indicator can appear in many different formats.
In these cases, whether it’s a charging bull or a raging bear — stay out of the market’s way. It’s also vital to use stops when trading; there’s no reason to let the market take advantage of your funds without you having a say in it. Bill Williams, the creator of this oscillator, was so famous that some people refer to it as the Bill Williams Awesome Oscillator. He was also responsible for developing the Bill Williams Alligator, the Market Facilitation Index, the Fractals indicator, and the Gator Oscillator. Many of his indicators and other technical analysis tools are usable in a wide range of market scenarios.
#1 – Cross Above or Below the Zero Line
This isn’t necessarily the Awesome Oscillator’s fault, as low float securities move erratically over short periods. In fact, most indicators have a hard time with small-cap investments, but this makes it near impossible https://www.fx770.net/ to use the Awesome Oscillator in crypto markets without pairing it with more reliable tools. Usually, a major explosion of the Awesome Oscillator in any direction is an extremely strong signal of a trend.
If you were to use the closing price and there was a major reversal, you would have no way of capturing the volatility that occurred during the day. A Bearish Twin Peaks setup occurs when there are two beaks above the Zero Line. The trough between both peaks, must remain above the Zero Line for the duration of the setup. A bullish zero-line crossover is when the awesome oscillator goes from below to above the zero line, while a bearish crossover is when it goes from above to below the zero line. Many traders will seek to enter a buy position either during the third bar or in the bar which immediately proceeds the third bar – providing that it is also green.
In a related article on Stocktwits Blog [4], see how day trader Dave Kelly describes trading low float stocks and the level of volatility with these securities. In every instance, the indicator is giving off false signals and leaving you on the wrong side of the trade. First, a major expansion of the awesome oscillator indicator in one direction can signal a really strong trend. Due to the number of potential saucer signals and the lack of context to the bigger trend, we give the saucer strategy a D. The saucer strategy is slightly better than the 0 cross, because it requires a specific formation across three histograms.
