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How to Trade with Awesome Oscillator and Accelerator Oscillator Forex Indicator?

May 9th, 2012 | by | learn forex

May
09

We have discussed many Forex indicators that can help traders to analyze the Forex market better. Forex indicators can not only measure the volatility of the Forex market, but also identify the trend and even reversal points to assist traders to make rational and informed decision in Forex trading. In this article, I would like to introduce two Forex indicators: Awesome Oscillator and Accelerator Oscillator for your reference.

What are Awesome Oscillator and Accelerator Oscillator Forex indicators?

Awesome Oscillator (AO) is designed by Bill Williams; it shows the current market momentum and is displayed as a histogram. The formula of AO shows as following: Awesome Oscillator = SMA(Median Price, 5 Periods) – SMA(Median Price, 34 Periods). Each bar that is higher than the preceding one appears in green; each bar that is lower than the prior one appears in red. The typical Awesome Oscillator Forex indicator appears on the Forex chart as below:

Forex-indicator

Accelerator Oscillator (AC) Forex indicator is a leading Forex indicator, which applies moving averages to predict where the Forex market is going next. Accelerator Oscillator Forex indicator is based on Awesome Oscillator and the main difference is the presence of its 5-period Moving Average on the AO. The acceleration of the Awesome Oscillator indicator can show possible trend reversals before the Awesome Oscillator identifies them. The formula of AC shows as following: AC = AO-SMA (AO,5).

Forex-indicator

How to use Awesome Oscillator Forex indicator in forex trading?

Typically, along with other oscillators like CCI, the Awesome Oscillator Forex indicator generates a trading signal when the zero line is crossed. The general rules of Awesome Oscillator Forex indicator states as following: When AO is trending above the zero line, then only buy orders should be taken; while sell orders can be taken when AO is moving below zero. To be more specific, a buy signal is generated when the oscillator is above the zero line has two descending red bars are followed by a green bar. A sell signal is generated when the oscillator is below the zero line and two ascending green bars are followed by a red bar.

However, is Awesome Oscillator Forex indicator as awesome as it says? Not exactly. It is proven that Awesome Oscillator Forex indicator is not stable enough for identifying the trend and analyzing the Forex market. Moreover, Awesome Oscillator Forex indicator is usually slow and late with signals. Therefore, it is better to combine AO with other indicators when analyzing the Forex market.

How to use Accelerator Oscillator Forex indicator in forex trading?

While Awesome Oscillator Forex indicator can be used to determine the general market trend, Accelerator Oscillator Forex indicator is used to identify short-term overbought/oversold conditions in that trend. Accelerator Oscillator can be trades in many ways. The basic way is to use the zero-line cross for trading signals – when the AC crosses zero from below enter long, and when it crosses from above enter short. A confirmation signal from an AC Forex indicator would increase the success rate and enhance profitability compared with only using AO Forex indicator. Traders can use AC as an exit alert since Accelerator Oscillator Forex indicator can indicate a trend quicker than the AO Forex indicator. Moreover, it can trigger an exit signal for an open position before the Awesome Oscillator. However, like I mentioned before, these signals are generally weak. My advice for traders is to wait for further confirmation from other Forex indicators.

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  • http://profile.yahoo.com/GAI55GLNNFVN7RRG62HC7DP6HU Sara

    Thanks for your effort, making difficult things easier to understand

  • http://www.facebook.com/people/Doson-Christina/100003546168394 Doson Christina

    Good post! Especially to the newbie just like me, thanks!

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