Awesome Oscillator Trading Strategy

Editorial Note: While we adhere to strict Editorial Integrity, this post may contain references to products from our partners. Here's an explanation for How We Make Money. None of the data and information on this webpage constitutes investment advice according to our Disclaimer.

The Awesome oscillator is a momentum indicator that compares short-term and long-term price movement using simple moving averages of the median price. It helps spot shifts in market momentum before price reacts, showing when buyers or sellers are gaining strength. By watching the size and direction of the bars, not just the color, you can read the market’s true tempo early.

The Awesome oscillator is more than just bar color flipping back and forth. It shows the pace of the move and helps you spot whether short-term traders are pushing harder than the longer trend allows. What makes it work is how clearly it shows shifts in control without needing extra indicators. Most people jump into the move too late when the bars flip across the zero line. But the real clue comes from how fast the bars grow and how deep they pull back before the flip. That is where you get a read on the market’s mood before it makes a visible move. In this article, we will take a detailed look into the Awesome oscillator, talking about its origin, calculation, strategies, and important tips.

Introduction to Awesome oscillator

Awesome oscillator on Microsoft chart

The Awesome oscillator is a momentum-based technical indicator that shows you whether the market is currently bullish or bearish. It does this by comparing short-term and long-term market momentum. Instead of following price alone, it looks at how quickly price is moving and whether that pace is building up or slowing down.

This tool appears as a histogram of green and red bars that move above and below a zero line. Green bars show increasing momentum, while red bars show momentum fading. The Awesome oscillator helps traders confirm trends, spot reversals, and avoid jumping into weak trades.

What the Awesome oscillator helps with

Confirms if a trend has strength behind it.
Signals early reversals with momentum shifts.
Helps identify trade setups based on color and bar position.
Can be combined with support and resistance for more precise entries.

Key uses of the Awesome Oscillator

Origin and development of Awesome oscillator

The Awesome oscillator was developed by Bill Williams, the same trader behind other indicators like the alligator and the market facilitation index. He introduced it as part of his system for reading the market’s momentum and structure, rather than just relying on price action.

Why it was created

Williams wanted a tool that measured market momentum across multiple timeframes.
He designed it to compare a 5-period and 34-period simple moving average (SMA), calculated from the median price instead of the close.
The oscillator helps traders spot when momentum is rising or falling – even if price is not clearly trending.

How it became popular

It was first introduced in Bill Williams’ books Trading Chaos and New Trading Dimensions.
Traders started using it across different markets, especially stocks, commodities, and indices.
It gained attention for being visual, easy to read, and effective for trend confirmation.

Why it’s still used

Works well in trending and ranging markets.
Helps simplify momentum reading without overloading the chart.
Its visual format (green and red bars) makes it accessible to both new and experienced traders.

Understanding the components of Awesome oscillator

The Awesome oscillator is made up of just a few simple parts, but together they give powerful insight into momentum. It measures the difference between two moving averages and plots the result as green and red bars on a histogram. These bars help traders see whether momentum is building up or slowing down – without needing to interpret complex formulas.

The core formula

At the heart of the Awesome oscillator is a comparison between two simple moving averages (SMAs), calculated from the median price, not the closing price.

Median price = (High + Low) ÷ 2

Awesome oscillator = 5-period SMA − 34-period SMA (of the median price)

When the 5-period SMA is greater than the 34-period SMA, the histogram is above zero (bullish momentum).
When the 5-period SMA is less than the 34-period SMA, the histogram is below zero (bearish momentum).

What the colors mean

The histogram bars change color based on whether the value is rising or falling.

Green bar
The current bar is higher than the previous one. This signals that momentum is increasing in the current direction.
Red bar
The current bar is lower than the previous one. This shows that momentum is weakening, even if price is still moving in the same direction.

Interpreting the zero line

The zero line acts as a midpoint. When the bars cross this line, it may suggest a shift in control between buyers and sellers.

A cross above the zero line signals potential bullish momentum.
A cross below the zero line points to possible bearish momentum.

How to set up Awesome oscillator

The Awesome oscillator is easy to find and use on most trading platforms. It’s a built-in indicator that automatically calculates and displays momentum without needing manual input. Once added to your chart, it begins plotting red and green histogram bars around a central zero line.

Access the indicator

Adding the Awesome oscillator to your chart is fast and straightforward.

How to do it

Open the indicators menu in your charting platform.
Type Awesome Oscillator in the search bar.
Click to apply it. The line will appear below your main chart in a separate pane.

Where it’s available

Pre-installed on MetaTrader 4 and 5, TradingView, ThinkorSwim, and most other charting tools.
No external downloads or plug-ins are required.

Configure the parameters

The Awesome oscillator doesn’t come with adjustable calculation inputs. It uses fixed periods, 5 and 34, based on simple moving averages of the median price. However, you can customize the display to suit your chart layout.

What you can customize

Bar color and style
Adjust the green and red colors for better visibility on your chart theme.
Histogram line thickness
Make the bars thinner or thicker depending on your visual preference.
Chart area
Choose where the indicator appears – most platforms default it to a panel below your price chart.

Setup tips

Keep the default values unless your platform allows custom code.
Match the color scheme with your existing indicators for clarity.
Combine the indicator with trendlines, support and resistance, or moving averages for stronger setups.

Trading strategies using Awesome oscillator

The Awesome oscillator is especially useful for trend confirmation and catching early signs of reversals. Because it shows momentum visually with green and red bars, it’s easy to read and apply in real trades. Here are some of the best trading strategies using the Awesome oscillator:

Zero line crossover strategy

This is one of the simplest ways to use the Awesome oscillator. It signals a shift in momentum as the bars cross the center line.

How to apply it

If the histogram moves above zero, it suggests bullish momentum.
If it drops below zero, it points to bearish momentum.
Use this as a confirmation tool after a breakout or trendline break.
Combine it with support or resistance levels for better entries.

Why it works

Helps you follow momentum instead of fighting it.
Adds confidence to breakout trades.
Avoids entering during unclear moves.

Twin peaks strategy

This setup looks for two peaks (or valleys) in the histogram to spot potential reversals before price reacts.

How to apply it

For a bullish signal, look for two red peaks below zero where the second is smaller and followed by a green bar.
For a bearish signal, look for two green peaks above zero with the second one lower, followed by a red bar.
This pattern often shows fading strength before a turn.

Why it works

Catches signs that the current trend is losing steam.
Helps time early entries or plan for a shift.
Useful in both trending and ranging markets.

Saucer strategy

This strategy helps spot short pauses in the trend before momentum picks up again.

How to apply it

In a bullish setup, look for three bars above zero: two red bars followed by a green one.
In a bearish setup, look for three bars below zero: two green bars followed by a red one.
Enter in the direction of the new bar if it confirms the trend’s continuation.

Why it works

Helps you enter a trend after a quick pullback.
Adds structure to momentum-based trades.
Works well with moving average support or resistance.

Divergence strategy

Use the Awesome oscillator to spot divergence between price and momentum.

How to apply it

If price makes a new high but the oscillator forms a lower high, that’s bearish divergence.
If price makes a new low but the oscillator forms a higher low, that’s bullish divergence.
Wait for the bars to confirm a change before entering.

Why it works

Gives early signs of a possible reversal.
Useful at key support and resistance areas.
Adds an extra layer of confirmation to your setup.

Traders who rely heavily on technical indicators will benefit from brokers that are compatible with advanced platforms such as cTrader, MetaTrader 5 (MT5), or TradingView. These platforms come equipped with a comprehensive suite of tools designed for in-depth analysis and strategy execution. To help you find the right fit, we've outlined a selection of top brokers that offer access to these platforms, so you can choose the one that aligns best with your trading goals.

Best brokers with access to technical tools
	iBroker	Pepperstone	FxPro	Deriv	IC Markets
Currency pairs	120	90	70	50	61
Crypto
Stocks
Min. deposit, $	1		100	5	200
TradingView
MT5
cTrader
Open an account	Study review	Go to broker Your capital is at risk.	Go to broker Your capital is at risk.	Go to broker Your capital is at risk.	Go to broker Your capital is at risk.

Why trust us

15+ years of independent market analysis
140+ evaluation criteria, reviewed by 50+ experts
Data-driven reviews of 200+ platforms, updated regularly
20+ industry awards & a wide network of global media partners

Learn more about our methodology and editorial policies.

Pros and cons of Awesome oscillator

Easy to read and beginner-friendly. The histogram format makes it simple to interpret. Green bars mean momentum is rising, and red bars show it’s slowing. This visual layout helps new traders grasp market shifts quickly.
Confirms trends and signals fading strength. The Awesome oscillator shows whether a move is gaining or losing steam. It confirms trends and helps spot when a rally or selloff might be losing power, giving traders time to plan their next move.
Supports various trading strategies. From crossover setups to divergence and saucer patterns, the indicator adapts to many styles. It works across multiple timeframes and markets, including stocks, indices, and commodities.
Works well with other tools. The Awesome oscillator pairs nicely with trendlines, moving averages, or support and resistance. It acts as a confirmation layer without cluttering your chart.

Lagging by nature. Since it’s based on moving averages, it reacts after the price has already started moving. This means you might miss the earliest part of a breakout or reversal.
May produce false signals in choppy markets. In sideways or low-volume conditions, the indicator can flip between red and green without meaningful movement. This may lead to confusion or poorly timed trades.
No built-in buy or sell alerts. It shows momentum changes, but it doesn’t say exactly when to enter or exit. Traders still need to rely on chart context or other tools for entry timing.
Less effective on short timeframes. On lower time frames, the signals become more sensitive and less reliable. It may respond to noise rather than actual trend shifts, especially during news events or sudden spikes.

Bar size reveals strength, not just color direction

What new traders usually lock onto with the Awesome oscillator is the bar color. But the real detail to track is the spacing and size. If green bars are getting taller and spreading out fast, short-term buyers are stepping up. But if the bars turn green and just sit there, the move is soft. The color shows direction. The size shows strength. Changing this one habit helps you avoid weak setups and only follow momentum when it is backed by real push.

Also, sometimes the bars flip from red to green but price does not respond much. That is not a breakout – it is pressure building under the surface. These quiet flips often turn into sharp action once price catches up. The Awesome oscillator is not just for clean entries. It is for catching the tempo of the market and getting in before others wake up to what is shifting.

Conclusion

Mastering the Awesome Oscillator can give traders a distinct edge by highlighting genuine momentum shifts ahead of visible price action. By using clear signals—such as the zero line crossover and twin peaks—traders can enter high-probability trades while avoiding common pitfalls associated with weak trend confirmation. For instance, catching a bullish crossover early or sidestepping a false breakout becomes far more achievable with this tool. Ultimately, the Awesome Oscillator isn't just another indicator—it's a strategic lens that allows traders to anticipate rather than react. Embrace its insights, and let momentum guide you to smarter, more confident trading decisions.

FAQs

How do you interpret the size and spacing of Awesome Oscillator bars for better trade decisions?

Beyond simply watching the color of the Awesome Oscillator bars, the size and spacing offer important insight. Taller and rapidly expanding bars indicate growing momentum and stronger participation from buyers or sellers, while flat or small bars suggest a weak move. Monitoring these aspects helps traders gauge the true strength of a trend and avoid entering on false momentum.

What visual cues from the Awesome Oscillator signal potential reversals before price reacts?

Visual cues such as the formation of twin peaks or a change in bar direction around the zero line can suggest a momentum shift before the price itself moves. For example, twin peaks (two consecutive highs or lows where the second is weaker) or bars crossing the zero line can indicate that market control is changing, offering early warning of a possible reversal.

In what trading conditions does the Awesome Oscillator produce less reliable signals?

The Awesome Oscillator tends to produce less reliable signals during choppy, sideways markets or on very short timeframes. In these scenarios, the indicator may flip frequently between red and green without reflecting meaningful market moves, leading to potential false signals and making trade timing more difficult.

Can you customize the Awesome Oscillator settings to fit different strategies?

The Awesome Oscillator uses a fixed calculation based on the 5-period and 34-period simple moving averages of the median price, which cannot be adjusted by users. However, traders can modify visual elements such as bar color, line thickness, and indicator placement on the chart to improve readability and fit their charting preferences.

Did you like the article?

Editors' Top Picks and Insights

2 hours ago Anastasiia Chabaniuk

Crypto on the court: How NBA Finals became a showcase for Ledger

#Crypto #Ledger

23 hours ago Johnathan Maverick

How to build wealth from scratch in 3 practical steps

#Finance #NVDA #Apple

1 day ago Eugene Komchuk

Kospi Index crash: Why South Korean market fell alongside AI stocks

#Stock indexes #Stocks #Finance

2 days ago Mira Kyivska

Bitcoin or Ferrari: Which investment is better?

#Crypto #Bitcoin

2 days ago Mira Kyivska

Strategy sells Bitcoin: Small sale tests market confidence

#Crypto #Michael Saylor #Strategy #Bitcoin

4 days ago Mikhail Vnuchkov

Ledger vs. Trezor: Search for ideal crypto wallet

#Ledger #Trezor Wallet #Crypto

All news

Team that worked on the article

Anton Kharitonov is an active trader and analyst. He employs both short- and long-term trading strategies, primarily based on fundamental factors, supported by technical indicators and intermarket analysis.

Learn about our editorial policies

Dan Blystone began his trading career in 1998 as an arbitrage clerk on the floor of the Chicago Mercantile Exchange (CME). He later traded bond and Eurex futures at proprietary firms such as Altea Trading, gaining valuable experience in high-frequency trading and risk management.

Chinmay Soni is a financial analyst with more than 5 years of experience in working with stocks, Forex, derivatives, and other assets. As a founder of a boutique research firm and an active researcher, he covers various industries and fields, providing insights backed by statistical data.

Index

Index in trading is the measure of the performance of a group of stocks, which can include the assets and securities in it.

Bitcoin

Bitcoin is a decentralized digital cryptocurrency that was created in 2009 by an anonymous individual or group using the pseudonym Satoshi Nakamoto. It operates on a technology called blockchain, which is a distributed ledger that records all transactions across a network of computers.

Extra

Xetra is a German Stock Exchange trading system that the Frankfurt Stock Exchange operates. Deutsche Börse is the parent company of the Frankfurt Stock Exchange.

Trading divergence

Trading divergence in Forex involves identifying when the price of a currency pair and an oscillator (such as RSI, MACD, or Stochastic) move in opposite directions, indicating potential trend reversals or continuations.

Day trading

Day trading involves buying and selling financial assets within the same trading day, with the goal of profiting from short-term price fluctuations, and positions are typically not held overnight.

Top 5 companies for you