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Features Awesome Oscillator in Forex trading
Awesome Oscillator – is one of the most famous indicators in the World, the authorship of which belongs to bill Williams. This algorithm was heard even traders who never read the books and notes of the bill. Such a reputation speaks volumes, so this review will consider the theoretical foundations of working with AO, and will strengthen the acquired knowledge with examples of market situations.
In English language Awesome Oscillator is translated as "Wonderful Oscillator" (also there are options – wonderful, magnificent, etc.). It came up with the name Sam Williams (in modesty he does not hold), and among traders caught on the AO abbreviation, the abbreviation can also be found in some retail terminals.
Speaking of terminals, the oscillator has become a classic and included on any platform, not matter what programming language it is written even on the Internet resources intended for the construction and analysis of graphs, AO is a standard set of tools.
The following graph shows an example markup Awesome Oscillator and the formula to calculate it:
what is Awesome Oscillator
As you can see, the histogram bars indicate the distance between the two moving averages, built on 5 and 34 candles at average prices. That's so simple, in fact, a logical component of the algorithm is based on the same principle as in MACD. But, first, the average (median) prices compared to closing prices provide more accurate information about the real trading range, and the second, classic variant the Awesome Oscillator does not provide for a specific setting.
The second remark I would like to dwell, as, perhaps, some readers raised the question – what good is the lack of ability to specify parameters on your own. The point here is that the beginner in searching for the optimum settings often falls into the trap of assuming that he will find a "secret" combination of settings that will provide a steady income.
The MFI, which is another famous indicator bill Williams.
Unfortunately (rather fortunately), everything is already tested (since the appearance of the indicator was replaced by a generation of traders, the market for a whole era), and numerous experiments have proved that the parameters proposed by Williams, are best suited for the job.
However, if you still really want to change the settings, you can amend the source code, but then have to abandon the experience of the traders and analysts in over a decade. Don't forget that for the standard AO there is a list of ready signals, which are processed both separately and in conjunction with other filters.
Signals Of The Awesome Oscillator
The first typical signal is called "bullish Saucer" (not to be confused with candle figure). It is formed when the combination of the following conditions:
The value Awesome Oscillator bars positive (i.e. MA(5) is above MA(34));
The sequence of the two red bars of the histogram change the green bar.
Awesome Oscillator on the chart
To open a long position follows on the next candle as the signal candle is closed, the markup can be changed (this phenomenon is known in slang as "update").
"Bear saucer" is the complete opposite of just what the considered signal:
Wonderful oscillator Williams
The second signal is formed at the intersection of Awesome Oscillator to the zero line, in this case, all elementary – if the bar closed above the zero – to buy the asset, if below zero sell:
The fast oscillator signals
And the third signal known as "Two peaks". Many confused with a similar formation – a classic divergence, but we should remember that the pattern of Williams takes into account only values of the indicator and divergence is a divergence between the momentum indicator and price.
Bullish the Two pikes signal is formed is always below the zero line, and describes a situation where a new low on the indicator above the previous minimum:
Trading Forex with the Awesome Oscillator
In this case, Williams recommends that you look at the purchases, at the same time, if there's another serial at least located above the previous one (that is the third in a sequence), the signal becomes stronger.
Similarly, a bearish signal is interpreted "Two peaks", but now the value Awesome Oscillator is above zero and every new high is below the previous one:
Testimony oscillator Williams
The first thing that catches the eye when studying the Awesome Oscillator is false signals. To deal with them optimization timeframe is useless, so it is recommended to combine the reporting of the indicator with other methods and tools. You need not go far, in fact, quite familiar with all systems offered by bill in his book "Trading Chaos".
Another point relates to the figures of the "Two peaks". Unfortunately, it is not suitable for the role of a self-sufficient analytical method and is used generally in the study of wave structures. Perhaps, of all considered signals the most reliable is the "Saucer" because it shows a resumption of the trend after the correction, and the trends, as you know, the easiest way to earn.
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| Category: Forex | Added by: (06.11.2017)
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| Views: 299
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