The Awesome Oscillator was created by Bill Williams. It subtracts a 34-period simple moving average of bar midpoints (high plus low, divided by two) from a 5-period simple moving average of the same midpoints. The result is a histogram centered at zero that shows whether recent price force is accelerating faster or slower than the broader medium-term pace.

Above zero means the fast average is higher than the slow one — bullish momentum. Below zero means the opposite. The bar color reflects direction of change from the previous bar: green if the histogram grew, red if it shrank. A sequence of rising green bars while AO is positive signals a trend with building force. Red bars while AO is positive signal fading momentum even if price is still rising.

There are no overbought or oversold levels. AO is a pure momentum tool — it measures the driving force behind price movement, not where price sits relative to a range. Zero-line crossovers are the simplest signal: momentum has shifted from one side to the other. Unlike MACD, which uses closing prices, AO uses midpoints, making it slightly more responsive to intrabar price extremes.