What the Awesome Oscillator is
The Awesome Oscillator (AO indicator) is a momentum indicator created by Bill Williams. Momentum here means how fast price is moving compared with its recent average. The AO is drawn as a histogram in a separate window below the chart, around a centre line.
- Bars above the centre line: recent prices are above the longer-term average.
- Bars below the centre line: recent prices are below the longer-term average.
It belongs to the same family as the Accelerator Oscillator, the Alligator and Fractals.
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Formula and default settings
The AO uses the median price of each bar, which is the midpoint between the bar's high and low. Closing prices are not used.
AO = short simple moving average of median price − long simple moving average of median price
A simple moving average (SMA) is a plain average of a fixed number of bars. Bill Williams' standard version uses a short period and a much longer one, so the AO shows the gap between fast and slow movement. The construction is close to the MACD, but the AO uses simple averages of the median price and has no signal line.
The awesome oscillator settings in the built-in MetaTrader version only cover colours and display. You cannot edit the periods there. To test other lengths, you need a custom indicator, and you should check how it is coded before relying on it.
How to add it in MT4 and MT5
In both MetaTrader 4 and MetaTrader 5:
- Open the chart.
- Go to Insert → Indicators → Bill Williams → Awesome Oscillator.
- Choose your colours and confirm.
By default, a bar is coloured green when it is higher than the previous bar and red when it is lower. Colour shows the direction of change only. It does not tell you whether the value is above or below the centre line.
How to read it: a drawn example
The picture below is a drawing, not real market data:
As price rises, the histogram grows above the centre line. When the rise slows, the bars shrink while still positive, and they turn red. When price falls, the AO crosses below the line. When the decline slows, the negative bars shrink again.
Traders usually look at these patterns:
- Centre line cross: a change in which average is on top.
- Saucer: a short change in bar colour on one side of the centre line, read as momentum resuming.
- Twin peaks: two troughs below the line, or two peaks above it, where the second is shallower. Some traders read this as fading momentum.
- Divergence: price makes a new extreme but the AO does not.
None of these is a trade signal on its own. Any awesome oscillator strategy needs testing, ideally on a demo account, before real money is involved.
Where it misleads
- Lag: the AO is built from moving averages, so it reacts after price has moved. See leading vs lagging indicators.
- Sideways markets: in a range, the AO crosses the centre line again and again, and colour changes appear on almost every swing.
- Gaps and news spikes: a single large bar distorts the median price average for a while.
- Not bounded: the AO has no fixed top or bottom, so "high" readings cannot be compared across instruments or timeframes.
- Timeframe dependence: the same pattern can mean different things on different charts. Multiple timeframe analysis and support and resistance add context.
Leveraged forex and CFD trading can lose money fast. An indicator does not reduce that risk; position size and stops do. See risk management.
Frequent questions
What are the default awesome oscillator settings?
The standard version compares a short and a long simple moving average of the median price. In the built-in MetaTrader version the periods cannot be edited, only the colours.
Is the AO the same as MACD?
No. Both compare a fast and a slow average, but the AO uses simple averages of the median price and has no signal line.
What does a green bar mean?
It means the bar is higher than the previous one. It can be green even below the centre line.
Does the AO repaint?
The bar that is still forming changes until it closes. Closed bars do not change.
Can it be used on gold or indices?
Yes, the calculation works on any chart, but the same limitations apply to every instrument.