Awesome Oscillator: What the Momentum Histogram Shows

The Awesome Oscillator is built with unusual simplicity: it is the difference between a fast and a slow average calculated on the midpoint of the bar rather than the close. The histogram shows whether a move is accelerating or fading.

Awesome Oscillator: how it is calculated

A 34-bar average is subtracted from a 5-bar average, and both are computed on the median price — the midpoint of high and low. Using the middle of the bar instead of the close is what separates it from MACD, which follows the same difference-of-averages principle but on closes.

How often it signals on real data

We ran the rule "Awesome Oscillator above zero" over daily bars for 12 currency pairs — 518 bars each, about two years. We counted frequency rather than profit: how often the state changes and what share of days the indicator spends in signal.

• State changes over the period: 21 (median across pairs)
• Annualised: 10.9
• Share of days in signal: 53.7%
• Sample: 12 pairs, 518 daily bars

The measurement is reproducible: the script and data are in the site's repository and the conditions are described in the methodology. Frequency is not return: it says only how often you will have to make a decision.

What the histogram tells you

Three things. Its position relative to zero shows which side dominates. A change in bar colour marks a change in the speed of the move — the histogram starts shrinking before price turns. And a disagreement with price is read as fading momentum, though like any divergence it is not an entry signal.

Why it switches so rarely

The measurement gave 11 sign changes a year — half as often as MACD and seven times less often than stochastic. The reason is the long second period: 34 bars smooth away almost everything except large moves. That makes the Awesome Oscillator a medium-term tool: unsuitable for intraday decisions, but a reasonable description of market phase.

The saucer signal and why it cannot be formalised

The author described several named histogram configurations, the best known being the saucer: three bars on one side of zero with the middle one lower than its neighbours. That can be described formally but is not a signal in any strict sense — the condition 'middle lower than the neighbours' is satisfied by any noise when the bars sit close together. Telling a saucer from a random dip requires a depth threshold, and none is specified. That is exactly why we publish no frequency for it: any number would be the number of a threshold we chose, not a property of the indicator.

Limitations

The indicator has no overbought levels — the scale is unbounded, and comparing values across instruments is meaningless. It also gives no direction on its own: a positive histogram with falling price happens at a reversal, and reading it as a buy signal there is premature.

This material is for educational purposes and is not individual investment advice.