The Awesome Oscillator is probably one of the best and simplest momentum indicator out there.
It reflect price changes in the market driving force and which will help you in identifying the trends strength up to the point of reversal and formation.
There are three main signals that may be seen and they include the following;
Here, there are three columns consecutively placed above the nought line , two of which are colored red and the third line is colored green and higher than the second one. This arrangement would be a clear buy signal while the vertically flipped and inverted arrangement would serve as a signal indicating the sell.
Nought line Crossing
For this, the histogram crosses the nought line in an upward direction hence changing its values from negative to positive.
When it happens this way, we have a buy signal hence the reversed pattern would be a sell signal.
In this signal type, when the figure is formed by two pikes, both below the nought line and the later-formed pike is closer to zero level than the earlier formed one, then the indicator displays a buy signal, the reverse formation indicates the sell signal.
How many ways of trading does this strategy include?
It includes three ways of trading.
The first way is to open a sell position when the oscillator is below the zero line forming peak, and open a buy position when the indicator is above the zero line forming a gap.
The second way is to open a sell position when the oscillator forms a double peak above the zero line, where the second high is lower than the preceding one.
The third way is to account crossing the zero line.
When it crosses this line in a descending manner, this is the time to open a sell position and when it crosses in an ascending manner, it is the time to open a buy position.
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