The Awesome Oscillator Divergence indicator for binary options is a modified version of the standard Awesome Oscillator indicator with additional alerts and visual support. In addition to the information provided by the original indicator, the AODivergence version shows the divergence of prices and the indicator histogram, and generates signals when divergence occurs.
Characteristics of the Awesome Oscillator Divergence binary options indicator
- Terminal: MetaTrader 4 .
- Timeframe: H1 recommended.
- Expiration: 3-5 candles.
- Option types: Call/Put.
- Indicators: aodivergence.ex4.
- Trading instruments: currency pairs , stocks, cryptocurrencies , commodities.
- Trading hours: around the clock.
- Recommended brokers: Quotex , PocketOption , Deriv , Binarium .
Installing the Awesome Oscillator Divergence Binary Options Indicator in MT4
The indicator is installed as standard in the MetaTrader 4 terminal.
MetaTrader 4 instructions for installing indicators:
Review and settings of the Awesome Oscillator Divergence indicator for binary options
As mentioned above, the modified version of the indicator differs from the classic Awesome Oscillator in built-in signals , therefore, we will not consider the basic principles of operation of the indicator itself.
The indicator settings include the following parameters:
- “fastma” – fast moving average period (default value 5).
- “slowma” – period of a slow moving average (default value 34).
- “isshowsignaltype1” – type and number of signals for buying Call options (default 1).
- “isshowsignaltype1” – type and number of signals for buying Put options (default 1).
- “divergencebars” – the minimum number of bars for which the indicator calculates divergence (default 4).
- “mode” – indicator mode (default 0).
The already familiar “fastma” and “slowma” parameters determine the period of moving averages and the appearance of the histogram itself. Standard parameters on all MetaTrader 4 platforms: "5" for fast and "34" for slow moving average.
The parameters “isshowsignaltype1”, “isshowsignaltype1” are responsible for the type and number of signals from the indicator. The default value is 1.
The “divergencebars” parameter is the minimum number of bars for which the indicator calculates divergence. For all timeframes, the indicator calculates divergence over at least four bars.
The “mode” parameter is a unique parameter of the new version that determines the operating mode of the indicator. There are three modes available in the indicator:
- AODivergence – mode value 0.
- AODivergenceNormilized – value mode 1.
- RSIDivergence – mode 2 value.
“AODivergence” mode is the basic mode. The histogram is identical to the classic Awesome Oscillator with added signals in the form of up/down arrows and additional lines of discrepancy between the price maximum/minimum and the indicator readings.
“AODivergenceNormilized” mode – the histogram is identical to the “AODivergence” mode, but with increased signal sensitivity.
Unlike "AODivergence" and "AODivergenceNormilized", the "RSIDivergence" mode tracks divergence based on the RSI indicator . As you can see in the picture above, in this mode there are many more signals.
It is also worth saying that there is a newer version of the AO-based divergence indicator - the Red Wave Oscillator indicator .
Signals and trading using the Awesome Oscillator Divergence indicator
Before moving on to the indicator signals, it is worth returning to the basics of technical analysis and remembering what divergence is, when it occurs in the market and how it can be used to buy binary options.
Typically, the indicator moves with the price: if the price reaches new highs, the indicator also sets a new high; if the price reaches new lows, the indicator sets a new low accordingly. If the price movement does not correspond to the indicator readings, a so-called “divergence” occurs.
Divergence allows you to determine a potential price reversal in advance. It signals a potential change in market conditions, indicating possible slowdowns in momentum, which could lead to a market reversal in the opposite direction of the relative current market movement.
Signals and trading using the Awesome Oscillator Divergence indicator for binary options
Divergence defined on a large time frame has a greater chance of triggering, therefore, the AODivergence indicator is recommended to be used on time frames from H1 and higher.
Divergence usually occurs before a price reversal, so this is a potential situation for buying Put or Call options.
Signals and trading using the Awesome Oscillator Divergence indicator
The indicator’s built-in signals make it much easier to independently search for divergences on the chart. To use the indicator, you just need to wait for the up or down arrow to appear.
The purchase of a Call option occurs when divergence appears in a downtrend and an upward signal:
Using the indicator to search for buy points for a Put option , you should wait for divergence in an uptrend and a downward signal arrow. An option is purchased on the second candle and closes with an expiration of 3 or 5 candles.
Conclusion
The Awesome Oscillator Divergence indicator is an excellent replacement for the standard Awesome Oscillator indicator. The idea of simplifying the trading process is not new, but every day you can see new developments for more comfortable work with the market. The indicator contains a sufficient number of variables to test it as a tool for working with binary options. Therefore, be sure to test this indicator on a demo account before trading on a real account.
The principle of operation of the indicator is self-sufficient, but we strongly recommend using additional tools to filter the main signals. The grail of binary options simply does not exist. That is why it is worth paying special attention to the rules of money management and additional systems for market analysis .
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See also:
How to install an indicator in MT4
Minimum account size for binary options trading
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