Awesome Oscillator Tested: It Moved With MACD at a 0.97 Correlation on All 4 Charts, and 1 of 20 Rules Passed After the Spread

Bill Williams introduced the Awesome Oscillator in his 1995 book New Trading Dimensions. It ships with MetaTrader 4 and 5 under Indicators, Bill Williams, and it is one of the few built-ins that has no settings at all: you drop it on the chart and get a green and red histogram around a zero line.

Most guides teach the same three buy signals and their mirrors for selling: AO crosses above zero, a “saucer” above zero, and “twin peaks” below zero. Each one is a rule, so each one can be counted on real bars with a fixed exit.

What does the Awesome Oscillator measure?

That is the same idea as the MACD line: a fast average minus a slow one. MACD uses exponential averages of the close with 12 and 26, AO uses simple averages of the midpoint with 5 and 34. The colour says nothing about the trend. It only says whether this bar’s value is higher or lower than the last one.

How was it tested?

• Data: EURUSD M5 from June 3 to August 26, 2026, 16,926 bars; gold M5 from June 16 to August 26, 13,736 bars. M15 built from the same bars.
• Five rules: AO crosses zero; the same cross only on the EMA 200 side; the saucer (above zero, two falling bars, then a rising one, and the mirror below zero); twin peaks (two lows below zero within 60 bars, the second higher, AO staying below zero between them, then a green bar, and the mirror above zero); and the colour change from red to green or green to red.
• Exit and pass: stop 1.5 ATR, target 3 ATR, 48 bars at most, one trade at a time, the same exit as in the forex indicators list, ranked. Cost 1 pip on EURUSD and $0.30 an ounce on gold, from spread and swap costs in MT4. A run passes if it makes money after cost, in both halves (split July 15), and beats the 95th percentile of 200 random-entry runs with the same exit, as in algorithmic rule vs random entry.

How does the AO histogram behave?

AO was split almost evenly above and below zero, and the colour changed about once every 5 to 6 bars. On EURUSD M5 that is a colour change every half hour and a zero cross about every hour and three quarters of the trading day. More than a quarter of zero crosses on EURUSD reversed again within 6 bars.

Is AO just a MACD in disguise?

Almost. Using the midpoint instead of the close changed nothing that matters: 0.996 or more. Using simple averages with 5 and 34 instead of exponential ones with 12 and 26 gave a line that moved with MACD at 0.97 on every chart. How the two compare as trading signals, and which one crossed zero first, is in Awesome Oscillator vs MACD.

Which Awesome Oscillator signal made money?

Pips on EURUSD, dollars an ounce on gold, trades in brackets. The random rows match the zero-cross rule’s trade count; every run was checked against its own random range.

Five of twenty runs made money after the spread, all on gold. Only one passed every check: twin peaks on gold M5, +$1.06 a trade, +$1.14 in the first half and +$1.01 in the second, well above its random range of +$0.35. That is a real result on this data, but it is 1 test out of 20, and twin peaks lost on both EURUSD charts. With 20 tries, one lucky pass is about what chance alone would give, so I would want it to hold on a second period before trusting it.

Gold M15 again flattered every rule. Four rules were in profit, but random entries with the same exit reached +$3.51 a trade at the 95th percentile there, and none of the four came close.

Why did the colour change lose the most trades?

The colour change fired 3,131 times on EURUSD M5, about once every 5 bars, so a one-trade-at-a-time system took 1,107 trades and paid the spread on every one. Before cost it made +0.09 pips a trade on EURUSD M5, close to nothing, and after cost -0.91. A signal that changes on 1 bar in 5 is mostly noise on a 5-minute chart, which matches what indicator lag vs whipsaw found for fast oscillators in general.

The saucer had the same problem in a milder form. On EURUSD M5 it was the only AO rule in profit before cost, +0.20 pips a trade, which a 1-pip spread wiped out five times over.

What would I do with the Awesome Oscillator?

• Treat it as a MACD, not as a new signal. At 0.97 correlation, adding AO to a chart that already has MACD adds a second copy of the same information.
• Do not trade the colour. It changed every 5 to 6 bars and lost after cost on all 4 charts.
• Do not trade the zero cross alone on EURUSD. It lost on both timeframes; the same result came up for MACD in MACD zero-line and trend filter tested.
• If you test the twin peaks, test them on gold and on new data. It was the one pass, on one chart. Whether other speeds of AO did better is in Awesome Oscillator settings for MT4.

Frequently asked questions

What is the Awesome Oscillator?

A histogram by Bill Williams: a 5-bar simple average of each candle’s midpoint, (High + Low) / 2, minus a 34-bar simple average of the same. Bars are green when AO rose from the previous bar and red when it fell.

Is the Awesome Oscillator a good indicator for forex?

Not as a signal on its own. 1 of 20 runs of five AO rules made money after cost, in both halves and better than random entries, and all five rules lost on EURUSD M5 and M15.

What is the best Awesome Oscillator strategy?

In this test, twin peaks on gold M5 was the only rule that passed, at +$1.06 an ounce a trade. It lost on both EURUSD charts, so it is a lead to retest, not a strategy.

What is the difference between the Awesome Oscillator and MACD?

AO uses simple averages of the candle midpoint with periods 5 and 34; MACD uses exponential averages of the close with 12 and 26, plus a signal line. On these charts the two lines moved together at a 0.97 correlation.

What does a green bar on the Awesome Oscillator mean?

Only that AO is higher than on the previous bar. It does not mean an uptrend: AO can be green below zero. The colour changed 17 to 19 times every 100 bars here.