hello everyone in today's video i will talk about a new trading strategy using
the awesome oscillator developed by bill williams with the relative strength index
this combines the power of measuring momentum with the awesome oscillator indicator and overbought or
oversold conditions with the relative strength index if you are new on the channel please
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the awesome oscillator may be new to some traders so here is a brief
outline of this trading indicator what is the awesome oscillator and how does it work
well bill williams usage was to measure the momentum in the forex market or any market
by using a combination of 34-period simple moving average of the median of the previous
34 candlesticks 5 period simple moving average of the median of the previous 5 candlesticks
zero line plus histogram one when the awesome oscillator is below the zero line we can
determine that the short term moving average five period simple moving average of median price is
lower than the 34 period moving average this is a downtrend two when the awesome oscillator is above
the zero line we can determine the trend is now an uptrend three when the histogram is rising green
we can determine that the awesome oscillator value of this candlestick is higher than the previous
for when the histogram is falling red the value of the awesome oscillator is less than the previous
candlestick while some traders may present these are buying or selling signals they more accurately
present an opportunity and not a signal to buy or sell at that moment we can also use an awesome
oscillator term called a twin peak which can show divergence in the forex pay you are trading
you can see this currency pair make a lower low on the right but the awesome oscillator is making a
higher peak the key is that the area between the two peaks remains above or below the zero line
depending on location of the peaks in this case of this chart we need the histogram between the
peaks to remain below the zero line for this trading strategy we are going to combine the
awesome oscillators ability to help determine momentum with the relative strength index
overbought oversold condition to produce a trading strategy this is a form of technical analysis and
we will use price action to trigger us into a trade we can day trade swing trade and even
position trade these setups your time frame will depend on how much time you can devote to trading
regardless of your approach ensure a stop loss is used and that risk management is considered
before taking any trading signal now that you've understood the background let's go
straight into actual rules of how to trade the relative strength index with awesome oscillator
selling rules step number one the 14 period relative strength index must be above the
70 level or in overbought conditions step number two wait for the relative strength index to start
heading below the 70 level and see if the awesome oscillator is showing us a red histogram bar step
number three if the awesome oscillator is showing red we look to place sell order in the current
candlestick buying rules step number one the relative strength index must be below the 30 level
or in oversold conditions step number two wait for the relative strength index to start heading above
30 level and see if the awesome oscillator showing us a green bar step number 3 if the awesome
oscillator is showing green histogram bar we look to place a by order in the current candlestick
there may be times where the cross of the relative strength index is followed one to
two candlesticks later with a turn of the awesome oscillator color a trader may consider that still
valid however a trading plan may have a limit on the number of candlesticks that it takes to turn
the awesome oscillator also note that we are not concerned with the zero line cross although you
may wish to use the histogram crossing zero as a time to add to your position if you recall a
zero line cross indicates a trend change and it is possible that by using the relative strength index
you are picking up an oversold overbought forex pair and catching a trend reversal
stop loss and profit targets stop loss is essential to your longevity as a forex trader
there are many ways to set a stop loss and you may consider using the swing high low that precedes
the trading setup as one just ensure you are not setting your stop right below swing lows or above
swing highs those are places of liquidity and i personally use those zones as failure test trades
you will be getting taken out of your position at the time you should be entering
profit targets can be set as a multiple of your risk or for a more trend following approach
hold your position until the zero line of the awesome oscillator is crossed in the opposite
direction of your trade picking tops and bottoms is rare but it can be done at times perhaps even
consider getting out with an oversold overbought condition however the markets can stay in that
condition for quite a while it does not mean the trend is reversing thanks for watching please
don't forget to like the video and subscribe to the channel i'll catch you in the next video