Awesome Oscillator is an indicator developed by Bill Williams and basically it represents a 34-period simple moving average, plotted through the bars midpoints and it calculates the difference between the 34 SMA and a 5 SMA. It is also worth to mention that it is an indicator used to measure market momentum.
AO=(SMA(High+Low)/2, 5 Periods) – (SMA(High+Low)/2, 34 Periods)
Because it is an oscillator, its values oscillate below and above zero.The generated values are plotted as a histogram of red and green bars. A bar is red when it is lower than the previous bar and a bar is green when it is higher than the previous bar.
When the values are above zero that usually means there is a short term of medium term bull trend in play. In the opposite scenario, there is a bearish trend in play.
In order to set the indicator on your mt4 platform go to Insert – Indicators – Custom – Awesome:
Looking at our chart below, you can see that the market had been in an uptrend as long as the Awesome Oscillator was above zero.