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Awesome Oscillator: description and rules of use

Awesome Oscillator (AO) – a popular indicator created by Bill Williams. The trading instrument shows trend reversal signals.

Brief description of the indicator AO

The indicator is based on simple moving averages and the strength of price movement. On the trading platform, the oscillator is presented in the form of a green or red histogram (with standard settings). Depending on the current market situation, the columns are below or above the zero level. In an uptrend, the bars increase and turn green, in a downtrend, they decrease and turn red.

The main difference between AO is that the indicators are calculated based on median prices, and not by closing. In other words, the minimum and maximum are summed for a set period, after which the result is divided by 2. Unlike the MACD, the Awesome Oscillator does not have a signal line, and the value of the moving average is fixed.

Indicator signals Awesome Oscillator

When trading binary options, 3 methods are used. They show the most accurate signals and will help you open a profitable deal. Next, let’s inspect these signals.

«Saucer»

To begin with, consider the option of buying a CALL option. The histogram should be above the zero level. We need to find three columns where the following conditions are met:

  • The first and third bars are approximately equal in height;
  • The first column is of any color, the third is green;
  • The second bar is red, and its top is lower than the first and third columns.

When these conditions are met, a so-called “saucer” is formed. The entry into the transaction is performed on the third bar.

When trading down, the histogram is below the zero level. The conditions for entering the transaction are opposite:

  • The first and third bars are approximately equal in height;
  • The first column is of any color, the third is red;
  • The second bar is colored green, and its top has a less negative value than the first and third columns.

Zero crossing

The signal to enter a long position is the change of the negative value of the histogram to a positive one. The first column pointing upwards should be green.

To buy a PUT option, wait until the histogram drops below the zero level. The first bar with a negative value should be red.

Two peaks

Conditions for entering a long position: a minimum appeared on the Awesome Oscillator indicator below the zero level, that is, a red bar with the most negative value. The next column should be green and closer to the “0” level. It is better to open a deal in the next or subsequent column of green color.

Conditions for entering a long position: a minimum appeared on the Awesome Oscillator indicator below the zero level, that is, a red bar with the most negative value. The next column should be green and closer to the “0” level. It is better to open a deal in the next or subsequent column of green color.

Additional recommendations

The optimal expiration period for binary options trading is 3 candles. The AO oscillator shows the most accurate signals during prolonged lateral movement. It is not recommended to trade after the release of important news.

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