July 8, 2016

The Awesome oscillator is one of the creations of Bill Williams, part of his Chaos Theory set of indicators. The Awesome oscillator is displayed in a sub window and oscillates around the 0-line with buy/sell signals being interpreted around the oscillator’s movement around the 0-line. Plotted as a histogram, the Awesome oscillator is merely a histogram representation of the 5 and 34 simple moving average calculated a bit differently.

Instead of using the closing prices as a typical moving average indicator does, the Awesome oscillator makes use of the mid points, which is (high + low)/2. The difference between the 34 and 5 period SMA is thus plotted on a histogram. Mathematically put, the AO or Awesome Oscillator is calculated as:

Median price = (H+L)/2

AO = SMA(5 period Median price) – SMA (34 period Median price)

The Awesome oscillator is one of the default oscillators that is available on the MT4 indicator.

The Awesome oscillator alert indicator is a modification of the general AO, where it also includes a signal line. The signal line is derived as a simple moving average of the AO values. When applied to the chart, the AO alert indicator looks as follows.

The indicator settings comprise of the following:

• Fast: Default is 5 and this can be changed to a faster period moving average
• Slow: Default is 34 and this can be changed to a slower period moving average
• Signal: Default is 5 and this can be changed to any value of your choice
• Signal Shift: Shift the signal by the current bar close or previous bar close. Default is 0
• EnableSignalLineAlert: Default is true. This alerts you when the AO histogram crosses above the signal line
• EnableZeroLineCrossoverAlert: Default is true. This alerts you when the AO histogram crosses above the 0-line

The Awesome Oscillator Alert MT4 Indicator is in fact very similar to the way the usual MT4 MACD indicator works. The following chart shows the similarity when the MACD’s values are also set to 5, 34, 5 (instead of the default, 12, 26, 9). It should help dispel any mystery surrounding the awesome oscillator alert indicator.

0-line crossing

Buy signals are triggered when the AO crosses the 0-line from below to above. Likewise, sell signals are taken when the AO crosses from above the 0-line to below. Because the AO is merely a trigger indicator, it is advisable for traders to use the indicator alongside other confirmation such as using moving averages or trading with pivot points.

This strategy works only in case of a strong trend. However, the catch is that in real time trading, no one knows how the trend will continue, leaving the indicator prone to giving false buy/sell signals during ranging markets (see chart below) and thus validating the previous statement that using the awesome oscillator alert indicator in isolation can lead to losses.

Signal line crossing

The signal line crossing is an alert that you get when the histogram crosses the signal line. The up/down arrows on the next chart shows the respective buy/sell signals that are plotted using the AO alert indicator.

As with the above case, the strategy doesn’t quite offer any consistency but simply shows price bars where there is scope for price to continue in its direction.

## Awesome Oscillator Alert MT4 Indicator

• By adding the signal line to the AO indicator, the AO alert indicator behaves like a MACD
• The only advantage you have is to option to be alerted to the 0-line or signal line crossing
• The AO alert indicator works only when a trend is strong but is prone to false signals in sideways markets
• Past buy/sell signals are not plotted on the chart, meaning that traders do not have the option to visually back-test with this indicator.

## Awesome Oscillator Alert MT4 Indicator – Recommended Time Frames

Technically speaking, you can use this MT4 indicator for all time frames. However, the shorter the time frame, you will see more fluctuation and possibly more whipsaw which may cause small losses that can eat up your portfolio quickly. We recommend that you use higher time frames like the 4H for better consistency.

## How to Trade with Awesome Oscillator – Video Tutorial

How to trade with Awesome Oscillator Video Tutorial

We have provided this powerful trend trading indicator to you at no cost. We humbly request for your help to spread the word by sharing on one of the social platforms below. To unlock the download link, you just need to share this page to help us achieve our goal of helping more traders out there.

Leave us a comment below to let us know your thoughts on this indicator. If you like this indicator, you might like see other indicators that we have carefully selected that will help you in your trading journey.

And if you can, you really should invest in a proven MT4 Expert Advisor to help you generate some profit on full autopilot. We highly recommend this powerful MT4 Expert Advisor.

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