Divergence trading is a great tool to have in your toolbox because divergence signals to you that something suspicious is happening and you should pay close attention.
Using divergence trading can help detect a weakening trend or a momentum reversal. Sometimes you can even use it as a signal that the trend is continuing!
The Awesome Oscillator Divergence Indicator blue line shows price divergence and indicator histogram. Based on the divergence, the Awesome Oscillator Divergence Indicator signals entry into the market in the form of up and down arrows.
Features of Awesome Oscillator Divergence Indicator
Time range: from 1 minute to daily
Currency pairs: Any
How does Awesome Oscillator work?
The creator of Awesome Oscillator (AO), Bill Williams, created it to complement his popular trading system Profitability. judging by the name and the creator’s comments alone, the author is very happy with using the tool.
The Amazing Oscillator is built on the basis of the difference between two simple moving averages (SMAs). The divergence and convergence of the faster SMA (5) and the slower SMA (34) allow to define the direction and intensity of the movement, as well as to identify areas of reversal on the graph. The basic principle of the awesome oscillator operation is the same as that of the famous MACD indicator.
The Magical Oscillator provides an indication of the direction of the market development. If it is above 0 and shows a high, it indicates an uptrend in the market. If the indicator is below 0 and continues on local lows, the market is trending down. Divergence may signal an impending reversal or correction.
The Amazing Oscillator is shown in a separate tab under the price chart. It is a colored bar chart. The expanding bars in the histogram are highlighted in green, while the declining bars are highlighted in red. The value of the indicator is not fixed and the central axis is zero. Awesome oscillator is available in most of the most famous trading terminals.