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Bill William’s Chaos Theory

Awesome Oscillator (AO) Overview

Awesome Oscillator (AO) determines market momentum (the second of five market dimensions) at a given time on the last 5 bars,comparing them to the momentum on the last 34 bars.

Awesome Oscillator (AO) is simply the difference between the 34-period and 5-period simple moving averages of the bar's midpoints (H+L)/2. Awesome Oscillator (AO) is displayed on the chart as a histogram:

Awesome Oscillator (AO)

In order to add Awesome Oscillator in MetaTrader 4 use the "Insert -> Indicators -> Bill Williams – Awesome Oscillator" menu sequence.

In MetaTrader 4 each histogram bar which is higher than the preceding one is green, each histogram bar which is lower than the preceding one is red.

Awesome Oscillator generates three buy signals and three sell signals, but we do not use them until the first fractal buy or sell signal is triggered outside the Alligator's mouth.

The Awesome Oscillator Saucer buy signal

Awesome Oscillator Saucer buy signal is generated when the histogram which is above the zero line changes its direction from falling to rising:

The Awesome Oscillator Saucer buy signal

Histogram “A” bar, of any color, should be higher than histogram “B” bar. Histogram “B” bar must be red. Histogram “C” bar (signal) must be green.

Once the signal has been generated, place a Buy Stop one tick above the high of the price bar that corresponds to the histogram “C” bar.

The most recent saucer signal cancels all previous ones (do not forget to delete pending orders after the signal is cancelled). Bear in mind that we buy only if the current histogram bar is green and we sell only if the current histogram bar is red.

The Awesome Oscillator Saucer sell signal

Awesome Oscillator Saucer sell signal is the opposite of the Awesome Oscillator Saucer buy signal (see above). This signal is generated when the histogram that is below the zero line changes its direction from rising to falling:

The Awesome Oscillator Saucer sell signal

Histogram “A” bar, of any colour, should be lower than histogram “B” bar. Histogram “B” bar must be green. Histogram “C” bar (signal) must be red.

Once the signal has been generated, place a Sell Stop one tick lower than the low of the price bar that corresponds to the histogram “C” bar. The most recent Awesome Oscillator saucer sell signal cancels all previous signals.

Awesome Oscillator cross buy (sell)

A buy (sell) signal is generated when the histogram crosses the zero line from below (above):

The Awesome Oscillator cross buy (sell)

Place a Buy Stop (Sell Stop) one tick above the high of the price bar (below the low of the price bar) that corresponds to the first bar that crosses the zero line. If there is a buy signal, histogram “B” bar (a signal one) is green, if there is a sell signal it is red.

Twin peaks signals

A buy (sell) signal called the Twin Peaks buy (sell) signal is generated when the histogram is lower (higher) than the zero line, and the last indicator's bottom is higher (last indicator's top is lower) than the preceding one. Between these two bottoms (tops) the histogram can never be higher (lower) than zero:

The Awesome Oscillator Twin Peaks signal

The Twin Peaks buy signal is the only buy signal that is created below the zero line. Similarly, the Twin Peaks sell signal is the only sell signal that is created above the zero line.

Place a Buy Stop (Sell Stop) one tick higher than the top (lower than the bottom) of the signal bar. In the case of a buy signal, histogram “C” bar (a signal one) is always green, otherwise it is red.

Never buy on a red histogram bar and never sell on a green one. If an “unfriendly” histogram bar occurs before the execution of a pending order, which was placed in the direction of the Awesome Oscillator signal, the signal has to be ignored and the order has to be deleted.

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