Awesome Oscillator indicator (AO), is an oscillator that helps the traders to understand the market momentum. The oscillator calculates the difference between a 34 period and a 5 period simple moving average (SMA) of a particular stock. The unique thing about this oscillator is it that when calculating the SMAs, the midpoint of the candlestick is considered instead of opening or closing price. AO is used to affirm a particular trend or anticipate a possible price reversal. Zerodha Kite can plot this indicator for traders in the charts.
How to set up Awesome Oscillator indicator in Zerodha Kite?
- Go to MarketWatch.
- Choose the stock you are going to trade.
- Right click on the stock and select chart from graphic icons.
- Chart window of the stock opens.
- Go to studies. Select studies.
- Go to Awesome Oscillator and click on it.
- A small window opens with default parameters of the indicator.
- Once the parameters are selected, the Done command is chosen, the parameters window goes off the screen and the indicator is plotted on stocks price.
AO in intraday –
- The indicator works well in all the time frames.
- The picture above shows State Bank of India (SBIN) stock price movement with respect to AO.
- The chart shows 1 min. timeframe.
- The strategy shows the price trend. Understanding price trend from this indicator is important before creating a position.
- As can be seen in the picture above, a buy position is created when at the end of the red bar below the horizontal line, a green bar starts appearing indicating a trend reversal.
- The buy position is closed when at the end of the green bar above the horizontal line, a red bar appears again indicating price reversal.
- From a similar position later we can create a further short position which can again be closed at the signal of price reversal.
- In intraday, the signal can create whip saws in a highly volatile market.
The Awesome Oscillator indicator works well in creating bullish or bearish positions. Bill Williams has shown us a major use of this technical indicator in his Profitunity Trading System, where you can use this indicator along with the Alligator indicator to find perfect entries.
Partha, an engineer by education, is theoratically actively following the stock and commodity markets since 1990. He is an active trader since 2003. He has received formal education in future and options and quantum analysis. He is presently working on research oriented projects using Python and data analytics.