Awesome Oscillator: a two-average momentum histogram

What it measures

The Awesome Oscillator is the difference between a five-period and a thirty-four-period simple average of the median price. It measures whether short-term momentum is running ahead of the longer-term baseline.

It uses the midpoint of each bar rather than the close, which makes it slightly less sensitive to where a bar happened to settle and slightly more sensitive to where it traded.

It is drawn as a histogram because the shape carries the information: the bars getting shorter while still positive is momentum fading inside an advance.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Compute the median price of each bar — the average of the high and the low.

2. 2

   Take a five-period simple average of that series.

3. 3

   Take a thirty-four-period simple average of the same series.

4. 4

   Subtract the slow average from the fast one.

How to read it

• Above zero the short-term average is ahead of the long-term one. Crossings of zero are the slowest and most meaningful events it produces.
• The bar-to-bar colour change — each bar compared with the one before it — is the earliest signal and the noisiest.
• Two consecutive bars moving against a strong histogram is a common early-exit trigger.
• It is unbounded and its scale depends entirely on the instrument, so absolute values mean nothing across markets.
• The zero line is where the two averages meet, which on a trending market is usually a pullback rather than a reversal.

Where it misleads

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