Indicators

Awesome Oscillator: What It Is and 3 Ways to Use It

Astron Team · 09/24/2026 · 4 min read

The Awesome Oscillator (AO) is one of the most popular momentum indicators among traders working with short- and medium-term charts. Created by trader Bill Williams, it helps show whether the strength behind the current price move is increasing or decreasing, which is different from simply looking at whether the price is rising or falling.

In this article, you'll understand how the AO is calculated, how it shows up on the chart, and three popular techniques for interpreting it in practice, with a numerical example to cement the reasoning.

What the Awesome Oscillator is and how it's calculated

The AO is a histogram that sits below the price chart, made up of green and red bars that oscillate above and below a zero line. The formula is simple: it subtracts a 34-period simple moving average of the candle's midpoint (high plus low, divided by two) from a 5-period simple moving average of that same midpoint.

In practice: AO = SMA5(midpoint) − SMA34(midpoint). If the short average is above the long average, the result is positive and the bar shows up green; if it's below, the result is negative and the bar shows up red. Suppose the 5-period average of the midpoint is at R$ 27.40 and the 34-period average is at R$ 26.90. The AO value for that candle would be a positive R$ 0.50 — a sign that short-term momentum is stronger than long-term momentum.

Notice that the AO doesn't look at the closing price in isolation: it compares two different speeds of the market. It's this comparison that lets you identify, often before the price confirms it, a change in the move's strength.

Technique 1 — Zero-line crossover

The most direct reading of the AO is watching for when the histogram crosses from negative to positive (the bars stop being red and turn green) or the other way around. A crossover above the zero line indicates short-term buying strength has overtaken long-term selling strength, and is usually interpreted as a signal of a possible rally. A crossover below has the opposite reading.

This technique works best when combined with the asset's bigger trend: an upward crossover within an already established uptrend tends to be more reliable than the same signal in a market with no defined direction, moving sideways.

Technique 2 — Saucer

The saucer pattern appears when the histogram, sitting on one side of the zero line (positive, for example), forms three consecutive bars: the first taller, the second shorter (a momentary drop in strength), and the third rising again and surpassing the second. This shape resembles a saucer and signals that a small pause in momentum has already been overcome, without the histogram needing to cross the zero line.

It's a technique used by those looking for faster entries, in favor of the trend the AO was already showing, without waiting for the full crossover — but, being an earlier signal, it also carries more risk of a false signal.

Technique 3 — Twin peaks

The twin peaks pattern is a possible reversal reading. On the positive side of the histogram, it occurs when two upward peaks form, the second lower than the first, with a valley between them that doesn't drop below the zero line. This loss of strength between the two peaks, even without the histogram turning negative, is read as a warning of a weakening uptrend. The mirror, on the negative side, warns of a possible end to a downtrend.

Since it compares the intensity of two moves in the same direction, this technique tends to show up a bit later than the saucer, but usually generates fewer false signals.

How to use the Awesome Oscillator day to day

None of the three techniques should be used alone as an automatic entry trigger. The AO works best as confirmation: first look at the chart's context — the trend, the nearest support and resistance levels — and only then look at the histogram to confirm whether momentum supports or contradicts that reading.

It's worth remembering that, since it's calculated with moving averages, the AO reacts to the price's recent past and never predicts the future with certainty. On Astron, you can plot the Awesome Oscillator alongside the price chart and test these three techniques on different assets and timeframes before applying any real amount.

Always define, before entering a trade, how much you're willing to lose in case the AO's signal doesn't hold up. Trading carries risk, and no indicator — not even the Awesome Oscillator — eliminates the possibility of loss.