Divergence line on Awesome Oscillator is acceptable: were going through histogramm body OR not? Divergence — the first analyzed bottom of the indicator is shallower than the previous one, and the corresponding price valley is deeper than the previous one.
In addition, the indicator must not rise above the zero level. I am not professional with divergence but according to my opinion - yes, you are right -it will be must more easy for us if this divergence line will not go through histogramm body.
Because as I understand - it was oscillator originally. Hidden divergence is used as a possible sign for a trend continuation. Hidden divergence occurs when price retraces to retest a previous high or low. This setup confirms that a retracement move is complete.
This divergence indicates underlying strength of an uptrend. This divergence indicates underlying strength of a downtrend. This divergence confirms that a retracement move is complete. This diverging indicates underlying strength of a downtrend. NB: Hidden divergence is the best divergence to trade because it gives a signal that is in the same direction with the trend.
It provides for the best possible entry and is more accurate than the classic type of diverging. Some well explained charts Tim, well done, divergence is one of many trading forms, sometimes a chart has the signes of divergence but holding your nerve is the key at times, depending on time frame you may have a trade move against you, at what point would you close.Cool Trading Tricks with Divergence
I suppose the time frame has to be taken into account with what your risk would be, all in all an excellent graphical breakdown of "divergence". Indic ator l ines must have Opposite slope versus Price trend line? Divergence line on Awesome Oscillator :. To add comments, please log in or register. Mehrdad Shiri Is divergence of technical indicator believable?
Divergence Indicator Function define to return several value in one dimention array. Sergey Golubev If I am wrong so sorry. Just an example :. I used to trade divergence on real account for some months The only problem I had - was the following: where to exit. Because the price can move to pips, or 50 pips, or to few pips. Tonny Obare I also dont have much experience with this but from my past experiments with trend lines i happen to think allowing the trend lines to cut the candles a little might improve performance compared to having the lines to only touch the tips of the candles.
But then again it was just a quick observation on my side but didn't quite do extensive experiments on it. I don't even know if the same might apply in the case you have here. Rob Cain I suppose the time frame has to be taken into account with what your risk would be, all in all an excellent graphical breakdown of "divergence" Rob. Is divergence of technical Divergence Indicator which indicator to predict.
Is divergence of technical Divergence Indicator Dynamic zone indicatorsIndicatorsTechnical Analysis. If you have not read the previous article covering the Alligator and Fractals, it would be wise to read it first and understand why the Fractal indicator is considered the first dimension in the Chaos Theory. After all, unless we see the price breaking above an Up Fractal or breaking below a Down Fractal, we cannot consider any other Wiseman Indicators to take a trading decision.
The core of any technical analysis-based trading system is the concept of extrapolation. In finance, extrapolation means an estimation of future value based on extending a previously known sequence of values. Extrapolation is a cornerstone of behavioral finance. However, keep in mind that proponents of Efficient Market Hypothesis EMH like Nobel laureate Eugene Fama believe it is not possible to earn an extraordinary return on investment from such forecasting methods.
There is a reason why any directional movement tends to create a ripple effect in the market because once a major support or resistance level is broken. Then, it triggers a series of pending orders that creates the illusion of momentum in the market. Now, Bill Williams and his team knew full well that if we can measure the strength of this momentum, it can help us enter the market when momentum is increasing, and we can safely get out when the existing momentum fades away.
In essence, Awesome Oscillator AO simply measures the difference between the 5-period and period simple moving average. After the first dimension, price breaking above or below Fractals, the Alligator Trading System usually generates the next signal in terms of Awesome Oscillator Zero Line Crossover.
In figure 1, you would probably already in the market with an open sell order as the Alligator signaled sell and the price broke below the last Down Fractal.
Now, according to the Alligator Trading System, once you see the Awesome Oscillator crossing below the zero line, it offers an excellent opportunity to increase your exposure in the direction of the prevailing trend.
So, you can increase your exposure to the existing short position by placing a Sell Stop order just one tick below the low of the bar that crossed below the zero line.
On this occasion, the low was at 1. When an uptrend or downtrend is in progress, look for the Awesome Oscillator to be above or below the zero line, respectively. If we see the Awesome Oscillator going against the prevailing trend, then we can expect to see a Saucer signal, which is basically two consecutive red bars during an uptrend followed by a green bar or two consecutive green bars followed by a red bar during a downturn will signal that the prevailing trend is about to resume.
As you can imagine, such market condition would be perfect for scaling into your existing position. In Figure 2, we can see that the Alligator indicator is clearly showing a downturn and the first dimension, Fractals, has broken.
Next, the Awesome Oscillator turned Green for almost a week, and the market stayed range-bound. The way to play this signal is simply placing a Sell Stop order one tick below the low of the bar that produced the Saucer signal. Here, the low of the bar was at 1.
So, we would simply place a Sell Stop order at 1. If you see a Saucer BUY signal during an uptrend, you need to place a Buy Stop order a tick above the high of the bar that produced the Saucer signal.
How to Use Awesome Oscillator in Trading. Main Signals
Simple, right? The last type of signal generated by the Awesome Oscillator is basically a divergence signal that is called a Twin Peaks signal. In figure 3, we can see that downtrend is pretty much established. On May 8,the Awesome Oscillator formed the lowest peak. Later, on May 30,the Awesome Oscillator formed the second peak, then produced a higher Green bar.
At this point, you would usually move all the Stop Loss of your Sell orders a tick above the Twin Peaks divergence bar, which is at 1.In this article, we will discuss an interesting indicator called Awesome Oscillator.
It was created and initially added to his trading strategy by a famous trading expert Bill Williams.
Judging by the name and the feedback of the author, he was quite happy with the indicator. The convergence and divergence of the fast SMA 5 and the slow SMA 34 allows defining the direction and the strength of the movement and finding reversal points on the chart. Awesome Oscillator gives an idea of the direction in which the market is moving. If it rises above 0 and demonstrates highs, there is an uptrend on the market.
If the indicator is below 0, renewing local lows, the market trend is descending. A divergence signals an upcoming reversal or correction. Awesome Oscillator is represented in a separate window under the price chart as a colored bar histogram. The growing bars of the histogram are colored green and the descending ones - red.
The indicator values are not fixed, the central axis is 0. The calculation formula of the indicator is the difference between the values of the two SMA periods 5 and 34 at the average price:.
When installing Awesome Oscillator, you may set the color and width of the growing and descending bars. Other parameters are set by default and may not be changed.
The Saucer signal forms when on the Awesome Oscillator histogram appears a cavity looking like a saucer bottom up or down. Saucer means that the correction is coming to its end, and the price will head in the direction of the main trend.
It appears in an uptrend when the Awesome Oscillator histogram is above 0. After another high, the bars start declining and turn red. If the histogram does not go below 0 and reverses upwards, there appears a green bar, forming a Saucer.
Open a buying trade with a Stop Loss behind the local low. It appears in a downtrend when the Awesome Oscillator histogram is below 0. After another low, the bars start growing and turn green.
If the histogram does not go above 0 and reverses downwards, there appears a red bar, forming a Saucer. Open a selling trade with a Stop Loss behind the local high.They are used to provide signals for potential trend direction, trend reversal or entry and exit alerts by analysing the weakness or the strength of an asset. Even though there are similarities in the way the two indicators function, there are also some differences in the calculation, the way they appear on the chart as well some of the basic strategies.
When you plot the indicators on your chart, they will appear in a separate box below the price chart.
But there are certain differences in the way they appear. The awesome oscillator looks like a histogram with red and green or red and blue bars.
The Power of Momentum, Divergence & Convergence
It should be noted that both indicators are unbounded oscillators. Both fluctuate around a zero line, which is used as the bases for certain trading strategies.
Traders can use different types of AO trading strategy to identify potentially profitable opportunities. The basic strategies which can be implemented in your trading activities based on the AO indicator are the zero-line crossovers, twin peaks and the saucer. The zero-line crossover buy signal appears when the AO crosses above the zero line. Before entering a long position, traders would also look at the colour of the bars: they would expect a certain number of green bars to appear before the crossover takes place and also after the crossover.
Sell signals are identified when the AO crosses below the zero-line and traders would want to see red bars before and after the crossover before opening their position. The problem with this strategy is that it can provide multiple false signals.
Another awesome oscillator strategy is the twin peaks strategy when traders try to identify two consecutive peaks for a bearish signal with the second peak being lower or two successive peaks for a bullish alert when the second peak is higher. Also, here, traders would consider the colour of the histogram after the second peak prior to opening the position.
The third basic strategy is called saucer strategy when traders try to locate a specific set-up pattern on the histogram. Accordingly, for a long position, they want to see three consecutive bars above the zero line which will be two red bars the second one is shorter than the first followed by a green bar.
For a short position, traders would expect to see two green bars, the second being smaller and the third bar is red. There are other trading systems, which can be used by traders based on the AO indicator. Pay attention to the awesome oscillator trading strategy description which considers the combination of multiple indicators or a combination of AO with the price action. The MACD indicator also has its basic trading strategies which are used by traders to determine potential signals.
MACD divergences is a MACD trading strategy used by traders because it can provide information that the trend might be coming to an end and reversal could be expected. The divergences are identified when the MACD line does not move in the same manner as the price.
Going through the MACD trading strategy description would also mean that you consider how apart or close to each other are the two lines on the MACD graph. You can make trades through a combination of specific awesome oscillator strategy and MACD strategy by trying to detect entry and exit signals using the MACD indicator and confirm the signals with the AO Indicator.
For instance, you can set up a trading system composed of the AO twin peaks strategy and the MACD signal line crossover. The graph shows how traders can confirm the identified MACD signals using the awesome oscillator indicator. In addition, it shows a set-up of a MACD signal which is not confirmed and how it could be determined. The white circle displays the point at which the MACD line crosses above the signal line, which is an indication of potential bullish movement.
The bullish movement is confirmed when the AO indicator exhibits a fully formed bullish twin peaks alert by forming two peaks with the second one being higher, followed by a blue bar.
After the price moves in a strong upward trend after the signal has been identified and confirmed with the AO indicator after a couple of periods.
Another signal that should be analysed is the one marked with a red circle on the MACD indicator when it seems that the MACD line will cross below the signal line, which is an alert for potential bearish movement. However, you can see that the AO does not confirm the bearish move with neither of its signals as the histogram does not cross the zero line, it does not fulfil the twin peaks alert and also the saucer bar set-up does not exist. Consequently, the trader can decide to maintain its long position until the relevant signal is identified.
Try to find the adequate trading system in accordance to with asset you plan to trade by identifying which system provides you with the most accurate signals. Also, traders need to detect the potential patterns when it comes to price behaviour as well as the best indicators set-ups for different instruments. Get your share! Learn to trade Trading guides. By Zoran Temelkov. Awesome oscillator calculations are based on the median price while the MACD is calculated using the closing price.In the previous trading strategiesmost of the divergence based trade set ups were primarily using either the Stochastics or the RSI indicator.
While divergence is common across any oscillator that you use, there is a certain element of risk involved when it comes to using the regular oscillators. In other words, there is a good chance that price can rally back in the event of a bearish divergence and post a new high, thus stopping out the trade despite being correct on the bias.
One way to address this issue is by using a histogram oscillator. In this Renko trading strategy we make use of the Awesome oscillator with Renko charts in order to find trade set ups based on divergence. The chart set up is relatively simple. After you load up your Renko bars, simply add the Awesome Oscillator to your chart. The chart set up should look as follows. In the chart below, we make use of a 25pip Renko chart with the Awesome oscillator.
For Short positions we look for bearish divergence. Meaning that price makes a higher high and Awesome oscillator makes a lower high. Once the set up is spotted, for trade trigger, we wait for the Awesome oscillator to print a bearish signal histogram crosses below 0 printing a Red bar.
For Long positions we look for bullish divergence. Meaning that price makes a lower low and Awesome oscillator makes a higher low. When this set up is spotted, for trade trigger, we wait for the Awesome oscillator print a bullish signal histogram crosses above 0 printing a Green bar. Besides the above basic set up, traders can also include additional trade confirmations. Some of the other methods that can be used include:.
The Renko divergence set up with Awesome oscillator is one of the easiest trade set ups to trade and regardless of the Renko box size that is used, the above set up works. The divergence set ups are also frequently formed thus giving many trading opportunities. Facebook Twitter LinkedIn Print. You might also like to read How do mean renko charts plot price.
Follow me on Twitter. Follow renkotraders. Recently Published. All Rights Reserved. Copyrights - Trading the financial markets is risky and you could lose more than your deposited or invested amount and it is therefore not suitable for everyone.
Please consult with your financial adviser before trading.Even if you not the fanatic of the wave market theory, it will be very useful to see accurately wave pieces in the market to enter the market after the termination of an old wave in an optimum point of the new.
Using the Awesome Oscillator, it is possible to make the analysis of the several time intervals before the moment of a possible turn. The indicator has excellent visual completion and noncritical delay — the author considers that only on the wonderful AO oscillator it is possible to construct a full strategy. Bill Williams considers that the price is the final result of the influence of all market factors, and therefore changes in the last turn.
Before the price, the Momentum has to react — its speed, and change of trade volume act as the main reason for price dynamics.
Awesome Oscillator Divergence Indicator
The Awesome Oscillator indicator measures the Momentum of five last bars and this value compares to the Momentum of the last 34 bars, which is trying to analyze short-term market moods in long-term tendencies. It gives the chance not only for an optimum first entrance, but also a possibility of further increase of a position on the developing trend. This difference is considered the assessment of driving force of the market and is brought to the resultant histogram. The indicator is similar to MACD, but its dynamics are considered more rounded due to use of the average price instead of the traditional price of the closing, and signals — earlier.
Awesome Oscillator is included in the standard package of all popular trading platforms, by default the histogram has the red-green color scale and is shown in an additional window, in parameters it is possible to change the thickness of columns and to add additional levels. The green column of the histogram is formed if the current bar is higher than previous, red — if below.
Standard version of the indicator. The visual presentation of results of calculation in the form of the histogram allows controlling not only the behavior of the indicator concerning the line of balance, but also to see in time divergence situations with the price.
Control of the Awesome Oscillator parameters. Scheme of trade signals. The color of the key bar before a turn shall be opposite color, that is, for example, before a bull turn the indicator shall be red — the transaction can already be opened, but such input is considered riskier. When the Momentum of the market changes, the indicator shall be colored in green color through bars is and there will be a point for the second entrance in the new market. If the trade signal completely corresponds to conditions, but the color of the histogram changed —we do not take such signal in hand!
The model means the soft transformation of driving force of the market in the direction of growth or falling. The model reminds a divergence — with its help we look for the first signs of a turn on the flat market sections: the weakening of the force of bears before purchase and bulls — before sale. The model is rather difficult to the identification, it can lead to false entrances, therefore, it demands confirmation from other tools.
Divergence on the histogram of Awesome Oscillator. Using Indicators. As the example of a complex system, the Parabolic SAR indicator can be added to this scheme — it will define a medium-term tendency of the market and will show levels for the optimum StopLoss installation. Such strategy demands a strong trend we look at Parabolic!It calculates with the last visible bars, and uses a basic candle pattern and divergence slope filtering with multi timeframe and alert ability. The indicator is non repainting more info!
The arrow will appear when the trigger candle is closed and the divergence formation is valid, but before entry a strong filtering method is required! The alert functions work with all trendlines and horizontal lines on the AO divergence window, not only with TrueTL's. For example, you can use it for alerting when your favorite level breaks.
Foreign exchange transactions carry a high degree of risk and any transaction involving currencies is exposed to, among other things, changes in a country's political condition, economic climate, acts of nature - all of which may substantially affect the price or availability of a given currency. Speculative trading in the foreign exchange market is a challenging prospect with above average risk.
You must therefore carefully consider your investment objectives, level of experience and appetite for such risk prior to entering this market. Most importantly, do not invest money that you are not in a position to lose. In addition, trading on a margin basis means that any market movement will have a proportionate effect on your deposited funds.
This can work for you as well as against you. The possibility exists that you could sustain a total loss of initial margin funds. Divergence prediction: draws possible divergence before it's formed. High risk: the divergence prediction arrow can disappear before the candle closes if the divergence formation isn't valid. Risk warning Foreign exchange transactions carry a high degree of risk and any transaction involving currencies is exposed to, among other things, changes in a country's political condition, economic climate, acts of nature - all of which may substantially affect the price or availability of a given currency.
Features and settings: Version: the indicator's actual version number. If an update is released, you can simply overwrite the files with our self-extractor or you can do it from the zip file manually installation steps. Username: enter your username that you received after purchase. Autosave it so if you once entered it, it is not necessary to enter again. Auto Refresh: If enabled, the indicator refreshes lines when the candle is closed or if you change the Timeframe or Symbol.
If disabled, the indicator redraws only when you run the "[TrueTL] Calculate" script. If enabled, the auto-scroll must be enabled too in MT4 Example Video. Backtesting ability: if the auto-scroll is disabled in MT4, and the Auto Refresh is disabled in the indicator's settings too, you can scroll back the chart, and the script will draw all past trendlines until the last visible candle. AO Timeframe: you can set the indicator's timeframe. This function is for interpolating these.
More info Sensitivity: with higher and highest sensitivity settings You can see more but of less quality divergences on the chart.