Awesome Oscillator (AO)

Awesome Oscillator (AO): The Momentum Masterpiece by Bill Williams

Updated: 2026-03-01 · Expert Analysis by Senior Trading Analyst · SEO Optimized for Beginners

Executive Summary

The Awesome Oscillator (AO) is a non-limiting oscillator that provides a clear view of the market's momentum. Developed by the legendary Bill Williams, it compares the recent market momentum with the momentum over a wider frame of reference, helping traders identify trend changes and confirm existing trends.

1. The Calculation: Midpoint Momentum

Unlike most indicators that use closing prices, the AO uses the midpoint of each bar (High + Low / 2). It subtracts a 34-period Simple Moving Average (SMA) from a 5-period SMA.

AO = SMA(Midpoint, 5) - SMA(Midpoint, 34)

2. Key Trading Signals

A. Zero Line Crossover

The simplest signal. When the AO crosses from below to above the zero line, it's a bullish signal. When it crosses from above to below, it's bearish.

B. Saucer Signal

A "Saucer" is a 3-bar pattern. A Bullish Saucer occurs when the AO is above zero and you see two consecutive red bars (the second lower than the first) followed by a green bar. This suggests a temporary slowdown in a trend followed by a resumption of strength.

C. Twin Peaks

This is a divergence signal. A Bullish Twin Peak occurs when there are two consecutive peaks below the zero line, and the second peak is higher (closer to zero) than the first, followed by a green bar.

3. Conclusion

The Awesome Oscillator is "awesome" because it filters out the noise of closing prices and focuses on the true center of market action. Use it to catch trend reversals early and ride the momentum waves with confidence.