Awesome Oscillator (AO)

Awesome Oscillator (AO) was developed by Bill Williams as part of his Chaos Trading System.

Awesome Oscillator is a histogram that displays the market momentum for a number of recent periods compared to the momentum of a larger number of recent periods. The Indicator is used to indicate market movement for the current shorter period compared to a longer previous period. The indicator provides good information in long trending markets but may not be a good indicator for fluctuating FOREX markets. You may find that AO is too slow for FOREX markets.

Buy/Sell strategies using the indicator are typically based on nought line crossing. Buy when the bar chart crosses the nought line, sell when it goes below the nought line.

Calculation:
MEDIAN PRICE = (HIGH+LOW)/2
AO = SMA(MEDIAN PRICE, 5)-SMA(MEDIAN PRICE, 34)

Example Graph:

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Tags: Calculation, Histogram, Market Momentum, Trending Market, Williams