| The Awesome Oscillator (AO) helps to measure an asset's momentum. It was developed by trader Bill Williams and is based on the idea that the momentum of a market is key to understanding its direction. The Awesome Oscillator is a histogram that displays the difference between a 34-period and a 5-period simple moving average (SMA) of the price midpoint (the average of the high and low price) on a chart. The histogram bars are green if the current bar is higher than the previous bar and red if the current bar is lower than the previous bar. When the bars are above the zero line, it indicates that the momentum is bullish; when the bars are below the zero line, it suggests that the momentum is bearish. Traders also look for "twin peaks" in the Awesome Oscillator histogram, which can signal a potential trend reversal. A twin peak occurs when two consecutive histogram bars of the same color are followed by two bars of the opposite color. The second peak should be lower (in a bullish trend) or higher (in a bearish trend) than the first. |
