"Magic Change" of Bill Williams's Awesome Oscillator
Awesome Oscillator
According to Bill Williams' definition, the Awesome indicator is an oscillator, abbreviated as AO. Unlike the KDJ indicator (range from 0 to +100), the output range of the awesome indicator is unlimited. Literally, many people might think that the awesome oscillator indicator is composed of a complex algorithm developed by MIT’s prodigy, but you may be surprised to find that the indicator was originally a basic calculation of two simple moving averages, or even NO EMA is used inside. In Tradingivew Built-in functions, tt is a red and green column composed of the difference between the simple moving average of the selected price data and the difference between SMA5 and SMA34. The formula is:
Awesome Oscillator = SMA5-SMA34,
It is built-in in TradingView's indicator system, and the code of its pine script is also very simple.
If you are familiar with Bill Williams’ theory, you may know that he has five "magic bullets", one of which is the usage of MACD with 5/34/5 as the parameter. Coincidentally, he really likes Fibonacci numbers 5 and 34, and he also chooses these two magic numbers as parameters in AO.
L1 Enhanced Awesome Oscillator
Although it adopts the idea of AO, it has undergone a "makeover" upgrade in terms of functions and mechanisms, and users who are familiar with the PINE coding can get a glimpse of the source code. In general, I call it: "enhanced AO, EAO".
Its characteristics mainly include:
1. Use XSA, a private customized moving average function of Blackcat1402, to replace SMA moving average.
2. In order to reduce the indicator lag, the magic number combination of 5 and 13 is used.
3. Increase the logic judgment and label prompt for top deviation and bottom deviation.
4. Add logical judgments and label prompts for buying and selling points.
5. The ATR Choppiness Index Dynamic algorithm customized by Qingmao is used to filter out the signals generated during the consolidation process.
From this "magic change", from the performance comparison of the above figure, the benefits of EAO compared to AO can be seen intuitively. Specifically, friends in the TradingView community may test and feedback the problems in use to me in order to improve. With this in mind, I position it as an L1 indicator.
EAO Strategy #1: Zero Axis Crossing
The usage of EAO is roughly the same as AO, but there are many convenient filtering and tips. Here I will introduce 3 basic strategies. The first is the zero axis. Like MACD, the zero axis is the limit of long and short points. EAO is a typical momentum trend indicator, usually combined with candlestick combinations. The yellow and purple columns of EAO are the deviation from the moving average, which is equivalent to the sub-level fluctuations in the Zen theory. The lateral movement close to the zero axis represents the formation of the sub-level pivot zone. The timing of the operation is to break through the pivot zone of the sub-level.
1. When the price fluctuates slightly, the momentum of EAO is low (yellow and purple bars). Need to wait for a breakout/retracement as a trading signal.
2. If EAO crosses zero strongly, you need to wait for the column to change color and take profit. If it is consolidating near the zero axis, take the consolidating price high and low points as the price range to wait for a breakthrough, and use the EAO column expansion as a confirmation signal.
3. At this time, the EAO indicator can be used in combination with candlesticks, volume, and trend line to increase the winning rate.
EAO Strategy #2: One-sided return carbine
The one-sided carbine means that after EAO runs in the trend for a period of time on the zero axis side, the corresponding column begins to shrink; however, after shrinking to a certain extent, the original trend column color reverses suddenly. This corresponds to a pause on the way up or down in price. For example, during the ascent process, this is the performance of the banker force shaking off or washing out individuals. In this process, you can lighten up your position appropriately, or you can lie down and wait. Because the overall trend is still continuing, because they are all on the same side of the zero axis, you can use the moving average, MACD and other trend indicators to judge the general trend, be friends with the general trend, and ignore subtle fluctuations. One-sided return to the carbine is a good opportunity to do T+0 scalping trading and increase positions.
EAO Strategy #3: Twin Peaks Deviation
Using EAO to observe the twin peaks divergence is a classic method. Deviation means that the price keeps breaking new lows, but the second peak of EAO's unilateral double peak is closer to the zero axis than the first peak. This kind of divergence appears above the zero axis and is the top divergence. The bottom deviation is the opposite, appearing on the lower side of the zero axis. It’s important to note that don’t think that deviations from 100% will cause prices to fall or rise. The market is a complex system, and there will be situations where the deviation is completed and then deviated, or the banker force will lead to one trick and long kills without deviating. This still requires traders to make judgments based on their own experience.
According to Bill Williams' definition, the Awesome indicator is an oscillator, abbreviated as AO. Unlike the KDJ indicator (range from 0 to +100), the output range of the awesome indicator is unlimited. Literally, many people might think that the awesome oscillator indicator is composed of a complex algorithm developed by MIT’s prodigy, but you may be surprised to find that the indicator was originally a basic calculation of two simple moving averages, or even NO EMA is used inside. In Tradingivew Built-in functions, tt is a red and green column composed of the difference between the simple moving average of the selected price data and the difference between SMA5 and SMA34. The formula is:
Awesome Oscillator = SMA5-SMA34,
It is built-in in TradingView's indicator system, and the code of its pine script is also very simple.
If you are familiar with Bill Williams’ theory, you may know that he has five "magic bullets", one of which is the usage of MACD with 5/34/5 as the parameter. Coincidentally, he really likes Fibonacci numbers 5 and 34, and he also chooses these two magic numbers as parameters in AO.
L1 Enhanced Awesome Oscillator
Although it adopts the idea of AO, it has undergone a "makeover" upgrade in terms of functions and mechanisms, and users who are familiar with the PINE coding can get a glimpse of the source code. In general, I call it: "enhanced AO, EAO".
Its characteristics mainly include:
1. Use XSA, a private customized moving average function of Blackcat1402, to replace SMA moving average.
2. In order to reduce the indicator lag, the magic number combination of 5 and 13 is used.
3. Increase the logic judgment and label prompt for top deviation and bottom deviation.
4. Add logical judgments and label prompts for buying and selling points.
5. The ATR Choppiness Index Dynamic algorithm customized by Qingmao is used to filter out the signals generated during the consolidation process.
From this "magic change", from the performance comparison of the above figure, the benefits of EAO compared to AO can be seen intuitively. Specifically, friends in the TradingView community may test and feedback the problems in use to me in order to improve. With this in mind, I position it as an L1 indicator.
EAO Strategy #1: Zero Axis Crossing
The usage of EAO is roughly the same as AO, but there are many convenient filtering and tips. Here I will introduce 3 basic strategies. The first is the zero axis. Like MACD, the zero axis is the limit of long and short points. EAO is a typical momentum trend indicator, usually combined with candlestick combinations. The yellow and purple columns of EAO are the deviation from the moving average, which is equivalent to the sub-level fluctuations in the Zen theory. The lateral movement close to the zero axis represents the formation of the sub-level pivot zone. The timing of the operation is to break through the pivot zone of the sub-level.
1. When the price fluctuates slightly, the momentum of EAO is low (yellow and purple bars). Need to wait for a breakout/retracement as a trading signal.
2. If EAO crosses zero strongly, you need to wait for the column to change color and take profit. If it is consolidating near the zero axis, take the consolidating price high and low points as the price range to wait for a breakthrough, and use the EAO column expansion as a confirmation signal.
3. At this time, the EAO indicator can be used in combination with candlesticks, volume, and trend line to increase the winning rate.
EAO Strategy #2: One-sided return carbine
The one-sided carbine means that after EAO runs in the trend for a period of time on the zero axis side, the corresponding column begins to shrink; however, after shrinking to a certain extent, the original trend column color reverses suddenly. This corresponds to a pause on the way up or down in price. For example, during the ascent process, this is the performance of the banker force shaking off or washing out individuals. In this process, you can lighten up your position appropriately, or you can lie down and wait. Because the overall trend is still continuing, because they are all on the same side of the zero axis, you can use the moving average, MACD and other trend indicators to judge the general trend, be friends with the general trend, and ignore subtle fluctuations. One-sided return to the carbine is a good opportunity to do T+0 scalping trading and increase positions.
EAO Strategy #3: Twin Peaks Deviation
Using EAO to observe the twin peaks divergence is a classic method. Deviation means that the price keeps breaking new lows, but the second peak of EAO's unilateral double peak is closer to the zero axis than the first peak. This kind of divergence appears above the zero axis and is the top divergence. The bottom deviation is the opposite, appearing on the lower side of the zero axis. It’s important to note that don’t think that deviations from 100% will cause prices to fall or rise. The market is a complex system, and there will be situations where the deviation is completed and then deviated, or the banker force will lead to one trick and long kills without deviating. This still requires traders to make judgments based on their own experience.
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