This is a confusing indicator in the sense that it is resembling with the Accelerator, and its interpretation should be the same. However, there are some differences and one way to trade binary options successfully is to look at both indicators at the same time. It means one should open a chart and then place both the Awesome and the Accelerator indicator on the same chart. Because these are oscillators, it means we should have now two different windows at the bottom of the chart and we can filter the signals.
This means that if the Accelerator shows us bearish conditions, we should go and buy put options only when the Awesome indicator confirms the signal. Otherwise, we should skip it, and the same should be done in bullish conditions.
Bill Williams Awesome Oscillator
The Awesome oscillator is offered by all trading platforms and the Metatrader, the most popular trading platform of them all, is no different. In order to apply it on any chart, one should go on the top menu, and under the “Insert” tab look for Bill Williams category. The third in line is the Awesome oscillator.
Like the name suggests, this is an oscillator and it means it will be applied below the actual charts. Before being plotted on a chart, a window appears with the two values (up or down) in green and red colors, but colors can be changed without a problem, according to each person’s preferences.
It is of course needless to say that this green stands for bullish price action and red for bearish price action.
This oscillator can be traded in two ways. One would be to look buying call options after at least three candles of the same color are appearing in a consecutive order. This means that by the time the oscillator has negative values and candles are red and price falling, we should look for a series of three consecutive green candles as a sign of a reversal. That being said, call options can be bought after confirmation, with the expiration date being strongly dependent on the time frame the oscillator is being placed on.
The opposite is true as well and by the time market is advancing with the Awesome oscillator having positive values, one should look to trade put options on the first series of three consecutive red candles.
The strategy above is of course a contrarian strategy and bears some risks but then in binary options trading profits can be made even if not all options expire in the money as it is enough for a high percentage to be profitable.
Finding Overbought and Oversold Levels
The second way to trade markets with this oscillator is to look for overbought and oversold levels. This can be done by looking for high values made by the oscillator and add a horizontal line at that level. The same should be done for the lower levels and the idea is to trade call options every time the oscillator is having negative values and moves below the line or put options when the oscillator is having positive values and moves above the line.
And yet some prefer to use the zero line crossing for adding a call option on a bullish cross or a put option on a bearish cross and in this case it is being said that the oscillator is having the zero level acting as a continuation pattern.
Some traders are using bullish or bearish divergences the same way as divergences are used on the RSI (Relative Strength Index) and this means that if the Awesome oscillator is not confirming a second low that price is making, a bullish divergence is formed and call options are recommended. On the other hand, if price is making two consecutive highs but the oscillator is not confirming those highs, it is being said that market is forming a bearish divergence and put options should be traded.
Trading It Like an Oscillator
Being an oscillator, it should be treated as such and, like mentioned above, it is either used as a divergence with price or as a continuation pattern by the time market is crossing the zero level. One thing is different though: oscillators are usually showing overbought and oversold levels, like the RSI (Relative Strength Index) is showing overbought levels at the 70 and oversold at the 30. Not this time, as the Awesome oscillator is not showing such levels. Finding such areas means one should do the homework and going back in time to see historical prices and what seems to be a spike higher should be a reference for future levels.
The two video recordings that are coming with this educational series project are showing you exactly where to find the Awesome oscillator and how to use it to find great places for striking prices with high probability to lead to successful call options.