Introduction

Bill Williams’s Awesome Oscillator (AO) is a 34-period simple moving average, plotted through the bars midpoints (H+L)/2, which is subtracted from the 5-period simple moving average, built across the bars midpoints (H+L)/2. It shows us quite clearly what’s happening to the market driving force at the present moment. It is a momentum indicator reflecting the precise changes in the market driving force which helps to identify the trend’s strength up to the points of formation and reversal.

Indicator Type

Momentum, Oscillator

Formula

median price = (high + low) / 2

AO = SMA(median price, 5)- SMA(median price, 34)

How to use

Bullish Scenario:- 

  • If the value of AO is above zero it is considered a bullish scenario. 
  • If the values grow the bullish trend increases indicating that buyers are strong and the price is likely to go up in the future. 
  • If the value decreases the bullish trend is weakening and might flat out in the future hinting that the prices may go down in the future.

Bearish Scenario

  • If the AO value is below zero then it is considered to be a bearish scenario.
  • If the value decreases further then bearish trend increases indicating more sellers than buyers hinting that prices might decrease in the future.
  • If the value increases mean that the bearish trend is decreasing and the curve might get flat and the prices may up in the future.
Awesome Oscillator with Candlestick

Building on Mudrex

AO indicator can be used to enter/exit if the trend is growing or weakening. A growing trend is when the AO indicator starts to increase from a large negative value and a buy signal can be generated. Similarly, a falling trend is when the AO indicator starts to decrease from a large positive value and can be used to generate a sell signal.

Strategy

  • BUY:- AC indicator[EMA] crosses up (-100) with short period as 5 and long period as 34.
  • SELL:- AC indicator[EMA] crosses down 100 with short period as 5 and long period as 34.
  • Timeframe:- 6H
  • StopLoss:- 10%

Creating on Mudrex

Components:- To create this strategy all we need is 2 indicator blocks, one to buy and one to sell.

For Buying, we will use the following settings:-

Indicator Block for Buy Signal over Mudrex

For Selling, we will use the following settings:-

Indicator Block for Sell Signal over Mudrex

Final Strategy:-

Awesome Oscillator Trading Strategy over Mudrex

Testing

Running on Binance Futures: BTC/USDT with tick interval of 6H yielded an overall profit of 65.69%

Back-Test Results for Awesome Oscillator

Quick Links