Awesome Oscillator (AO) Indicator: Complete Guide for Binary Options

What is the Awesome Oscillator and how does it work?

Awesome Oscillator is a histogram oscillator that calculates the difference between the 5-period and 34-period simple moving averages (SMA). Key features:

• Histogram display: Green bars indicate bullish momentum, red bars indicate bearish momentum

• Zero line: The main level for determining the direction of movement

• Calculation formula: AO = SMA(5) - SMA(34)

• Visual clarity: Allows you to quickly assess the state of the market

A distinctive feature of the indicator is its ability to identify changes in momentum before they become visible on the price chart.

Setting up the Awesome Oscillator in the trading platform

Recommended settings for binary options:

1. Fast SMA: 5 periods

2. Slow SMA: 34 periods

3. Color settings:

   • Positive values: green

   • Negative values: red

Optimal timeframes:

• M1-M15 for medium-term trends

• M15-H1 for long-term trends

Awesome Oscillator trading signals

1. Crossing the zero line:

• Call: The histogram crosses the zero line from below

• Put: The histogram crosses the zero line from above

• Expiration: 1-5 minutes

2. Divergence with price:

• Bullish divergence: Price updates lows, AO shows rising lows

• Bearish divergence: Price updates highs, AO shows falling highs

• Expiration: 2-5 minutes

3. Saucer signals:

• Buy: Three consecutive green bars after a low

• Sell: Three consecutive red bars after a high

Practical trading strategy

Zero Crossing Strategy:

1. Wait for the histogram to clearly cross the zero line

2. Confirm the signal with a reversal candlestick pattern

3. Enter the trade in the direction of the crossover

4. Expiration: 1-5 minutes

Double Top/Bottom Strategy:

1. Identify the divergence between the price and the AO histogram

2. Wait for the second top/bottom to form on the indicator

3. Enter the trade when the level is broken

4. Expiration: 2-5 minutes

Combining with other instruments

To increase the effectiveness of the Awesome Oscillator, use it in combination with:

1. Alligator - to determine the direction of the trend

2. Fractals - to determine reversal points

3. Support/resistance levels - to accurately determine entry points

4. Moving averages - to confirm the trend

Risk management:

• Trade size: no more than 2-3% of the deposit

• Profit/risk ratio: 1:2

• Trade only when there are clear signals

• Maximum daily risk: 5%

Conclusion

The Awesome Oscillator is a powerful tool for determining market momentum and reversal points. Its main advantage is its clear histogram representation and ability to generate early signals. For binary options traders, the ability to use AO on different timeframes in combination with other tools from Bill Williams' system is particularly valuable.