Mastering swing trading requires identifying short-term trend shifts ahead of everyone. This is where the versatile Awesome Oscillator comes in. The AO combines a unique dual-moving average formula to spotlight accelerating and decelerating momentum.

In this guide, you’ll discover how to utilize the Awesome Oscillator to step up your trading. You’ll learn the precise methods professional traders use to spot momentum shifts and time market reversals and determine high-probability setups.

Overview of Awesome Oscillator

The Awesome Oscillator, frequently abbreviated to AO, is a 34-period simple moving average plotted through the central points of a bar/candlestick chart. More specifically, the AO technical indicator is based on the difference between the 5-period and 34-period simple moving averages.

The AO aims to identify market momentum shifts earlier than other indicators. As a swing trading tool, it can be used to time entries and exits based on periods where bullish or bearish momentum is accelerating or stalling.

Trading in Different Markets with the Awesome Oscillator

Now that we’ve covered the basic mechanisms behind the Awesome Oscillator, let’s analyze some example trading strategies for applying them to swing trading across different markets.

AO Applied to Commodity Trading

Commodities like crude oil, natural gas, gold, and silver tend to develop strong directional trends. As a result, the Awesome Oscillator can be exceptionally helpful for timing entries and riding out extended swings.

When trading commodity swing setups with the AO, watch for the following signals:

• Saucer bottoms below -20, signalling uptrend entries
• Saucer tops above +20, signalling downtrend entries
• Pullbacks to the zero line during trends produce low-risk entry points

Place protective stops on the opposite side of zero. For silver and gold trading, additional upside or downside targets can be projected based on previous AO peaks and trough swings.

Swing Trading Stocks with the Awesome Oscillator

The Awesome Oscillator (AO) can be a valuable indicator for swing trading stocks. It identifies momentum shifts and pullbacks within the existing trend, which are useful entry and exit signals.

Saucer Signals

• Saucer bullish signals occur when the AO forms a rounded bottom in the oversold zone below the zero line and then crosses back above zero. This marks a momentum shift from oversold to potentially overbought.
• Saucer bearish signals appear when the AO forms a rounded top in the overbought zone above the zero line and then crosses below zero. This signals a momentum shift from overbought to potentially oversold.
• These reversal signals can identify early entries for swing trades in the direction of the new momentum shift.

Centerline Crossovers

• Bullish centerline crossovers occur when the AO crosses above the zero line into positive territory, signalling to accelerate upside momentum.
• Bearish centerline crossovers happen when the AO crosses below the zero line into negative territory, signalling an accelerated downside momentum.

Pullbacks to Zero Line

• During a strong uptrend, temporary pullbacks to the zero line provide low-risk entry points to swing trade toward the broader trend.
• During downtrends, rallies to the zero line allow entering short trades with predefined risk points.

For the highest probability setups, trade in the direction of the prevailing sector trend by utilizing these AO signals for timing swing entry and exit points.

Check out this suggested article: Trading In a Bear vs. Bull Market -Strategies and Tips

Forex Swing Trades Using the Awesome Oscillator

For forex swing trading, the AO shines when used across higher time frames like the 4H, daily, and weekly charts. Ideal signals include:

Deep Momentum Saucer Signals

Look for saucer bottom signals when the AO forms a rounded shape below the -50 level, indicating deeply oversold conditions, before crossing back above -50. This signals upside momentum acceleration ahead.

Saucer top signals occur when the AO forms a round top above the +50 level, signalling deeply overbought conditions, before crossing back below +50. This indicates downside momentum acceleration next.

Zero Line Rejections

Existing uptrends often see temporary pullbacks to the zero line where the pullback “rejects” the level and momentum resumes higher. These temporary dips allow for low-risk entries in the uptrend.

Downtrends similarly see upside rejections off the zero level, where the counter-trend bounce stalls and the downtrend resumes. These signals provide short entry opportunities.

Divergences

When the price of an asset reaches a higher high, but the Awesome Oscillator shows a lower high, this is a bearish divergence. It indicates that there may be potential weakness in the trend ahead. On the other hand, if the price of an asset reaches a lower low, but the AO shows a higher low, this is a bullish divergence. It flags that the trend may be losing momentum and could soon exhaust.

Use wider stops given forex volatility. Set profit targets based on previous AO extreme levels toward the new swing trade.

Read and expand your knowledge: Forex Trading - All You Need to Know and How to Begin.

Applying the AO to Crypto Swing Trading

The Awesome Oscillator is also effective when crypto swing trading major coins like Bitcoin and Ethereum. Pay attention to:

Wide momentum swings signal entries in harmony with the broader trend. Bullish/bearish flips between oversold and overbought thresholds—confirmation from other crypto-specific indicators like RSI and Stochastics.

Use wicks, supports, and moving averages for stop placement when swing trading cryptocurrencies. Capture more significant moves by scaling out partial profits at AO peaks and troughs.

You might also like to read: How to Start Crypto Leverage Trading

Bottom Line

The Awesome Oscillator is a versatile swing trading indicator, offering traders an effective method for capturing shifts in momentum across markets and time frames.

Swing traders can boost accuracy and uncover high-probability opportunities by combining AO signals with confluence factors and optimizing entry and exit methodology.

Learning to integrate Awesome Oscillator analysis into an edge-enhancing trading regimen is worthwhile for part-time and full-time swing traders.

Just remember to backtest strategies and practice effective risk management when live trading real capital.

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“When considering “CFDs” for trading and price predictions, remember that trading CFDs involves a significant risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be considered investment advice.”