Awesome Oscillator Explained: Bill Williams Momentum

The Awesome Oscillator (AO) is a momentum indicator built by Bill Williams that plots the difference between a 5 period and a 34 period simple moving average of each bar's median price as a histogram around a zero line. When the bars sit above zero short-term momentum is faster than the longer trend; when they sit below zero it is slower.

That single idea is what makes the AO indicator easy to read at a glance. Instead of a number on a scale, you get green and red bars rising and falling around the centre. This guide explains how the calculation works, how to read momentum above and below zero, the three classic signals, why the AO resembles MACD, and how Market Structure Pro handles momentum differently.

How the Awesome Oscillator is calculated

The maths is short. For every bar you first take the median price, which is the bar's high plus its low divided by two. Then you build two simple moving averages (SMAs) of that median price and subtract one from the other.

The fast 5 period SMA reacts quickly to recent price, while the slow 34 period SMA represents the broader swing. When recent price accelerates, the fast average pulls away from the slow one and the histogram grows. When price stalls or reverses, the gap shrinks and the bars contract toward zero. Most platforms colour each bar by whether it is higher (green) or lower (red) than the bar before it, not by whether it is above or below zero.

Reading momentum above and below zero

The zero line is the reference for the whole indicator. Think of it as the point where the fast and slow averages are equal.

Colour adds a second layer. A run of green bars means each reading is stronger than the last regardless of which side of zero it is on, and a run of red bars means momentum is weakening bar by bar. Traders often combine the side of the zero line (direction) with the colour streak (acceleration) before acting.

The three classic Awesome Oscillator signals

Bill Williams described several setups for the AO. Three are used most often.

1. Zero-line cross

The simplest signal. When the histogram crosses from below zero to above, short-term momentum has overtaken the longer average, a potential bullish shift. A cross from above to below is the bearish version. It is fast but prone to whipsaws in ranging markets, so most traders treat it as a heads-up rather than a standalone trigger.

2. The saucer

A saucer is a momentum-change signal that stays on one side of zero, so it can appear before a zero cross does. A bullish saucer needs the histogram above zero with at least two consecutive red (lower) bars followed by a green (higher) bar, suggesting a brief pullback that has resumed in the trend direction. The bearish saucer is the mirror image below zero.

3. Twin peaks

Twin peaks is the AO's divergence signal. A bullish twin peaks forms when there are two troughs below zero, the second trough higher (less deep) than the first, with the bar between them rising back toward zero. It signals that selling momentum is weakening even if price made a lower low. The bearish twin peaks is two peaks above zero with the second lower than the first.

How the AO resembles MACD

If the Awesome Oscillator feels familiar, that is because it is structurally close to the MACD. Both subtract a slower moving average from a faster one and draw the result as a value oscillating around zero, so both answer the same question: is short-term momentum stronger or weaker than the longer trend? The differences are in the ingredients.

Because the AO has no signal line, it gives fewer cross-based triggers and leans more on the histogram shape, which is why patterns like the saucer and twin peaks matter so much. MACD traders, by contrast, often watch the line crossing its signal.

Using the Awesome Oscillator on MT5

The AO ships with MetaTrader 5 by default, so there is nothing to download. In MT5 open Insert → Indicators → Bill Williams → Awesome Oscillator, or find it under the same group in the Navigator. It drops into a separate window below the price chart with its fixed 5 and 34 settings, which Bill Williams intended to be left alone. A few practical notes:

• The AO is a lagging momentum tool, not a leading one, so it confirms moves rather than predicting them.
• It works best alongside trend context. A zero cross in a strong trend is more reliable than one in a flat range.
• It does not respect overbought or oversold ceilings the way RSI does, because it has no fixed scale.

How Market Structure Pro handles momentum

Here is the honest part: Market Structure Pro does not use the Awesome Oscillator. It is a fine, simple histogram, but MSP reads momentum through three other engines instead, MACD, Stochastic RSI and TSI, each contributing to a wider picture rather than firing its own signal.

Those momentum reads are just part of the story. MSP combines 27 tools, covering structure, trend, volatility, volume and momentum, into a single weighted score. Instead of asking you to eyeball whether a saucer counts or whether two peaks line up, it outputs one verdict, a confidence level, an A, B or C grade and a plain-English explanation of why it reached that conclusion. It is non-repainting, works on every MT5 instrument, and you can test it free for 7 days.

If you want to keep using the AO, nothing here stops you. The point is simply that a histogram around zero is one input, and a trade decision usually needs several. That is the gap MSP is built to close.

Keep learning: explore more indicator breakdowns in our Learn hub, compare it with MACD, or see how everything fits together on the Market Structure Pro homepage.