Awesome Oscillator signals are similar to those derived from a raw MACD. However, the Awesome Oscillator applies simple moving averages, 34 and 5 periods, as opposed to the exponential moving averages used for the MACD. Also, the input value is the median of the bar, whereas the default MACD uses the close. Other than the description below, you may also review the Awesome Oscillator Spotlight Newsletter (with video).
Indicator Description
Bill William’s Awesome Oscillator is similar to the raw MACD. However, instead of the exponential moving averages used for the MACD, this indicator applies simple moving averages periods of 34 and 5. Also, the input value is the median of the bar, not the MACD default close. The Awesome Oscillator signals and histogram output is also similar to the raw MACD line.
Using the Zeroline
As other indicators from this category, it has values that fluctuate above and below the zeroline. Oscillator values above the zeroline indicates a short term momentum which is higher than the long term. Values below the zeroline indicates a short term momentum which is lower than the long term. Accordingly, the indicator come with corresponding color plots i.e. green/red for long/short momentum.
You may identify basic Awesome Oscillator signals when there is a zeroline cross. This indicates a change in momentum representing buying/selling opportunities. Additional Awesome Oscillator signals can are the so called Twin Peaks & Saucer setups.
One may best use the indicator in combination with a higher timeframe trend filter, statistical analysis and / or volume analysis. You may for example review the Multiple Rainbow Filter, the Efficiency Ratio, the Parabolic SAR, the Modified Z Score and the Force Index indicators.
Other library momentum oscillators
Our standard momentum oscillators category feature a number of other entries, such as the Acceleration Declaration, Fast Stochastics, LBR 3/10, RSI or the Double Smoothed Sochastics (Blau). Furthermore, we also have a category for advanced oscillators, with among others the Rainbow Oscillator, Projection Oscillator and the MACD BB Lines. These tools build on the same concept as the standard momentum oscillators, but with a higher degree of sophistication. In general, they allow for added value approaches, utilizing a set of more complex algorithms. A multiple MACD indicator featuring a selection of 30 different moving averages as input series, is also available from our library. We also have a category for Gapless Indicators, featuring among others the Gapless MACD.
Other momentum indicators to consider include the Ichimoku Kinko Hyo and the TDI indicator.
Finally, in our Indicator Spotlight on the Z-score, we discussed how to create a fixed scale for the Awesome Oscillator. Specifically, the post discussed how the Z-score can be used to create a fixed scale for an Awesome Oscillator strategy. This is particularly useful if you want to create testable entry and exit conditions for trading systems.
The indicator is available for NinjaTrader 8.