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How to use awesome oscillator in forex?

The Awesome Oscillator is a technical analysis tool that is used to measure market momentum. It is an oscillator that is derived from the difference between a 5-period simple moving average and a 34-period simple moving average. The Awesome Oscillator is used by traders to identify potential trade setups and to confirm trend changes. In this article, we will explore how to use the Awesome Oscillator in forex trading.

Understanding the Awesome Oscillator

The Awesome Oscillator is a histogram that is displayed below the price chart. It consists of green and red bars that move above and below the zero line. When the bars are above the zero line, it indicates that the short-term momentum is bullish, and when the bars are below the zero line, it indicates that the short-term momentum is bearish.

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The Awesome Oscillator is based on the idea that momentum precedes price movements. When the momentum is strong, it can push the price in the same direction for an extended period. Conversely, when the momentum is weak, it can lead to a reversal in the trend.

Identifying Trade Setups

The Awesome Oscillator can be used to identify potential trade setups. When the momentum is strong, it can signal a potential trend continuation trade. For example, if the bars are consistently green and above the zero line, it indicates that the bullish momentum is strong. Traders can look for long positions in this scenario.

Conversely, when the momentum is weak, it can signal a potential trend reversal trade. For example, if the bars are consistently red and below the zero line, it indicates that the bearish momentum is strong. Traders can look for short positions in this scenario.

Confirming Trend Changes

The Awesome Oscillator can also be used to confirm trend changes. When the momentum changes direction, it can signal a potential trend reversal. For example, if the bars were consistently green and above the zero line, and then they turn red and move below the zero line, it indicates that the bullish momentum has weakened, and the bearish momentum has taken over.

Traders can use this information to confirm a trend change and enter a trade in the opposite direction. It is important to note that the Awesome Oscillator is a lagging indicator, and traders should use it in conjunction with other technical analysis tools to confirm trend changes.

Using the Awesome Oscillator with Other Indicators

The Awesome Oscillator can be used in conjunction with other technical analysis tools to improve its effectiveness. For example, traders can use it with the Moving Average Convergence Divergence (MACD) indicator to confirm trend changes. The MACD is a momentum indicator that is based on the difference between two exponential moving averages.

When the MACD crosses above the signal line, it indicates a potential bullish trend, and when it crosses below the signal line, it indicates a potential bearish trend. Traders can use the Awesome Oscillator to confirm the trend change and enter a trade in the direction of the new trend.

Conclusion

The Awesome Oscillator is a powerful technical analysis tool that is used by traders to measure market momentum. It can be used to identify potential trade setups and to confirm trend changes. Traders should use it in conjunction with other technical analysis tools to improve its effectiveness. The Awesome Oscillator is a lagging indicator, and traders should use it in conjunction with other technical analysis tools to confirm trend changes.

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