Bill Williams Awesome Oscillator Strategy Rules (go long trading rules)

Step #1: Check if the Awesome Oscillator indicator is below the zero line.
First, we need to ensure that the Awesome Oscillator indicator is below the zero line. This first step is part of a pattern with three rules called the Awesome Oscillator Twin Peaks.
Don't worry, you'll understand better once we finish explaining the three rules.

Step #2: Check if the Awesome Oscillator indicator has two wave troughs, with the second trough higher than the first trough.
Secondly, you need to confirm whether two consecutive wave troughs appear on the Awesome Oscillator histogram, and that the second trough is higher than the first trough. These two fluctuations will form what is known as the Twin Peaks pattern, and the name "Awesome Oscillator Twin Peaks" comes from this.

To truly establish the double peak pattern of the Awesome Oscillator, the last rule also needs to be satisfied.
Step #3: Check if the Awesome Oscillator histogram turns green immediately after the second low.
We need to confirm that the AO histogram turns green immediately after the second low point. This step will validate the effectiveness of the Awesome Oscillator double peak pattern. When the AO histogram turns green, it indicates that buyers are starting to intervene, but it is only considered a true market sentiment reversal signal when it breaks above the zero line.

Currently, the double peak formation of the Awesome Oscillator has been completed. However, we have not yet confirmed that buyers have taken the dominant position, which leads to the next step of Bill Williams' Awesome Oscillator trading strategy.
Step #4: Before buying at the current market price, wait for the Awesome Oscillator histogram to break above the zero line.
As we mentioned before, when the AO indicator is above the zero line, it indicates positive momentum, and when it is below the zero line, it indicates negative momentum. You will notice that the AO histogram bars remain positioned above and below the zero line, even though the color may change between green and red.
This actually represents different degrees of momentum strength. However, the true shift in market sentiment occurs when the AO histogram breaks above the zero line, and that is precisely why this is our entry signal.

At this point, you have already opened a position, but we still need to determine the stop loss and take profit levels, which is the next step of the strategy.
Step #5: Set the protective stop loss below the recent swing low, which should align with the second swing low of the AO double peak pattern.
The AO histogram typically aligns with price movements. Therefore, when the price forms a swing low, there should also be a corresponding low on the AO histogram.
We do not want to leave any buffer below the low point of this wave, as any slight breakdown will invalidate the AO double peak formation.

Now, the only part that still needs to be clarified is where to take profits, which brings us to the final step of Bill Williams' Awesome Oscillator trading strategy.
Step #6: Take profit immediately when the Awesome Oscillator histogram shows two consecutive red bars.
We will take profits immediately when we first see signs of weakness in the market. Specifically, for example, when the AO histogram shows two consecutive red bars, we will immediately close our position for a profit, as the market is likely to reverse afterwards.

Note: The above content is an example of a go long trade... When doing a short trade, please use the completely opposite rules. In the image below, you can see an actual short trade example using Bill Williams' Awesome Oscillator strategy. I recommended 🅱️iya to my friends, as it is the world's first multi-asset trading wallet, allowing easy real-time conversion of mainstream fiat currency to digital currency. It also provides safe and convenient fiat withdrawal solutions, effectively addressing issues of freezing and fund accessibility. Users can easily convert to cash and withdraw through the U platform.

Conclusion
If you are doing momentum trading, Bill Williams' Awesome Oscillator (AO) strategy is really a very useful tool. Its idea is not to catch the bottom or the highest point, but to enter the market when the momentum truly shifts in our favor.
In simple terms, this method is a more advanced breakthrough trading approach, as a true breakthrough often signifies a shift in momentum. Moreover, the most classic and popular usage in the AO strategy is the double peak formation, as in most cases, this formation can provide trading opportunities with particularly excellent risk-reward ratios.
With this method, traders can make decisions more scientifically and clearly, as the AO indicator can intuitively show changes in market momentum. This not only helps you analyze complex trends more easily but also allows you to find the most suitable entry and exit points, thereby maximizing profits and minimizing risks.