On This Page
- What is the Awesome Oscillator?
- How is the Awesome Oscillator calculated?
- Worked example
- What green and red Awesome Oscillator bars mean
- Awesome Oscillator zero line cross example
- Awesome Oscillator saucer, twin peaks and divergence
- Median price input and Awesome Oscillator lag
- How traders use the Awesome Oscillator
- Limitations of the Awesome Oscillator
- Bottom line
- FAQ
Key Takeaways
- The Awesome Oscillator subtracts the 34-period simple moving average of median price from the 5-period simple moving average of the same input, and plots the difference as a histogram around zero.
- Median price is the bar high plus the bar low divided by two, so the Awesome Oscillator ignores the open and the close that most other oscillators are built on.
- Bill Williams introduced the indicator in his 1998 book New Trading Dimensions as one component of a chaos-theory trading framework.
- Bar color encodes the change from the previous bar rather than the sign of the value, which is what makes the saucer and twin-peaks readings possible.
- AO reads in the instrument’s price units, so divide it by price before comparing its size across stocks.
- AO lags price. The 5-period average’s observations average 2 bars old and the 34-period average’s 16.5, so a zero crossing confirms a move already under way.
What is the Awesome Oscillator?
The Awesome Oscillator (AO) is a momentum indicator that subtracts the 34-period simple moving average of median price from the 5-period simple moving average of the same input and plots the difference as a histogram around zero. Median price is the midpoint of each bar, (high + low) / 2. Bill Williams described it in his 1998 book, New Trading Dimensions.
How is the Awesome Oscillator calculated?
Median price = (high + low) / 2. AO = SMA(5) of median price − SMA(34) of median price.
The result is measured in price units. Positive AO puts the fast average above the slow average; negative AO puts it below. The histogram’s signed height shows that gap.
Formula
AO = SMA(5) of median price − SMA(34) of median price, where median price = (High + Low) / 2- Median price uses only the bar high and low, so the open and close are discarded.
- SMA(5) and SMA(34) are simple moving averages of that median price, each bar weighted equally.
- The 5 and 34 periods are fixed in the original definition and inherit their unit from the chart timeframe.
- Each histogram bar is drawn green when the current AO value exceeds the previous value and red when it is lower, independent of whether the value is positive or negative.
Worked Example
A stock trades a rally out of a base. The five most recent bars print highs and lows of $99.12 and $97.62, $99.58 and $97.98, $100.10 and $98.40, $100.67 and $98.87, and $101.28 and $99.38. The 34-period simple moving average of median price stands at $98.94, and the prior bar read AO of −$0.20.
- Median price of the newest bar = ($101.28 + $99.38) / 2 = $100.33
- The five median prices are $98.37, $98.78, $99.25, $99.77, and $100.33, summing to $496.50
- SMA(5) of median price = $496.50 / 5 = $99.30
- AO = $99.30 − $98.94 = +$0.36
- Change from the prior bar = +$0.36 − (−$0.20) = +$0.56, so the bar prints green
AO moves from −$0.20 to +$0.36, crossing above zero as the 5-period average moves above the 34-period average. It also rises $0.56 from the prior reading, so the histogram bar is green under the change-based coloring rule.
What green and red Awesome Oscillator bars mean
Green identifies a reading above its previous value. Red identifies a lower reading. A rising negative bar is green below zero, while a falling positive bar is red above zero.
Color tracks the change in momentum, so a run of red bars above zero shows an advance losing speed before AO turns negative.
Awesome Oscillator zero line cross example
The example’s five midpoints are $98.37, $98.78, $99.25, $99.77 and $100.33. Their sum is $496.50 and their average is $99.30.
Subtract the $98.94 slow average to obtain AO +$0.36. The prior reading was −$0.20, so the indicator crosses zero and rises $0.56. The new bar is green.
Awesome Oscillator saucer, twin peaks and divergence
For a bullish saucer, AO stays above zero while a lower middle column is followed by a higher column. The bearish pattern reverses that shape below zero. The chart’s 2.12, 1.91, 1.83 and 1.89 sequence includes a clear dip and recovery.
Bullish twin peaks compare two troughs below zero, with the second closer to zero and no zero crossing between them. The pattern completes on the first rising bar after the second trough, and that bar is the entry trigger. Reverse the conditions for peaks above zero.
A price divergence compares price swing extremes with the AO readings at the same bars: a lower price low with a higher AO low is bullish.
Median price input and Awesome Oscillator lag
If the high and low stay fixed, the same bar midpoint remains regardless of the close. If a closing trade changes an extreme, it changes the midpoint too.
The two averages have mean observation ages of 2 and 16.5 bars. On a steady linear path, their difference equals 14.5 times the midpoint slope per bar. A move that stalls pulls AO back toward zero while price holds its level, and a fresh push widens the gap again.
How traders use the Awesome Oscillator
Choose the AO event, price level, decision bar and entry. Set the structural invalidation, position size and exit. Raw AO is in dollars, so scale it by price before setting one threshold across several stocks.
A zero-line cross like the example’s +$0.36 bar marks momentum turning positive; Options Flow shows whether the sweeps and blocks in the underlying turned with it, and the Options Profit Calculator prices each structure from the cross to your target.
Limitations of the Awesome Oscillator
- Read AO on the interval you trade. The 5 and 34 periods are fixed in the original definition and take their unit from the chart interval, so the same instrument reads differently on different timeframes.
- Set AO thresholds per instrument and interval. AO reads in price units with no built-in overbought or oversold levels, so scale it by price before comparing stocks.
- Take the close from the price chart. AO ignores the open and close: a close anywhere inside an unchanged range leaves the midpoint, and AO, the same.
- Watch the histogram shrink for the early turn. AO is built from two moving averages, so turns and zero crossings come after price has already moved, and a sideways market can produce repeated crossings.
- Fix the saucer and twin-peaks column sequence in the rule before trading it; sources define both patterns differently.
Bottom line
The Awesome Oscillator shows the gap between a 5-period and a 34-period average of bar midpoints, a direct read on whether recent prices are running above or below their longer average. Read the sign for that relationship and the color for its change, define saucer and twin-peaks rules exactly, and confirm every signal on the price chart.
Clear answers
Frequently Asked Questions
Sources and Further Reading
- thinkorswim Learning Center: Awesome Oscillator study
- Open Library: Bill Williams, New Trading Dimensions (Wiley, 1998)
- Fidelity Technical Indicator Guide: Simple Moving Average
- Fidelity: What Is Technical Analysis?
How entries are sourced, calculated and updated: editorial methodology.