That's right, you should ignore sell signals when the MACD is above zero.
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AO is positive and made 2 highs; draw a slope trendline connecting these 2 highs; buy once a new bar on AO will break this slope trendline.
Green does not necessarily mean positive and red does not surely mean negative. So the histogram may show green bars when AO is below zero but its values are growing. When the AO value crosses above or below the Zero Line, it indicates a change in momentum.
If AO goes from negative to positive territory this gives a chance to buy. If AO goes from positive to negative this gives a chance to sell. However, to be more specific crossing the Zero Line means a new 1st wave of a new trend is coming. Divergence happens on a chart when the price and its relevant indicator are moving in opposite directions.
Convergence appears on a chart when the price and its relevant indicator are moving in the same directions. Convergence is opposite to divergence and may arise after the failed divergence. Depth of correction of relevant lows in uptrend or highs in downtrend helps to distinguish a momentum move from a correction move.
In down trend depth of correction is estimated by tops of AO. What is the main secret of AO? Despite statements of Mr. Bill Williams that the Awesome Oscillator is his sole development within the strategy of chaos, in practice it is only a part of the truth. The only thing that was introduced by Williams in this tool is a convenient display of 2 moving averages in the form of a histogram. Have a look at the below chart: Do you notice coincidence between AO and 2 moving averages? In practice, AO histogram just illustrates simple crossing of 2 moving averages applicable to the median price!
Buy when AO crosses above the Zero Line. Sell when AO crosses below the Zero Line. If you use this strategy as it is, you may get quite a number of good entries if you catch a current trend.
It compares three consecutive bars, all three either positive or all three negative. All the 3 studied bars should be either above zero or below zero. A Buy Saucer Setup: A Sell Saucer Setup: This strategy allows to jump into a current trend after a small pullback. However, this setup is too simple as well. A Buy Twin Peaks Setup: AO is negative; there are 2 lows of AO and the 2nd low is higher than the 1st low, so we have divergence between the price and AO; the next bar after the 2nd low turns green.
The 2nd low is higher than the 1st low and followed by a green bar in AO. A Sell Twin Peaks Setup: AO is positive; there are 2 highs of AO and the 2nd high is lower than the 1st high, so we have divergence between the price and AO; the next bar after the 2nd low turns red.
When AO's values are above the Zero Line, this indicates that the short term period is trending higher than the long term period. When AO's values are below the Zero Line, the short term period is trending lower than the Longer term period. This information can be used for a variety of signals. This is simply when the AO value crosses above or below the Zero Line.
This indicates a change in momentum. When AO crosses above the Zero Line, short term momentum is now rising faster than the long term momentum.
This can present a bullish buying opportunity. When AO crosses below the Zero Line, short term momentum is now falling faster then the long term momentum. This can present a bearish selling opportunity. Twin Peaks Twin Peaks is a method which considers the differences between two peaks on the same side of the Zero Line.
The second peak is higher than the first peak and followed by a green bar. Also very importantly, the trough between the two peaks, must remain below the Zero Line the entire time. The second peak is lower than the first peak and followed by a red bar.
The trough between both peaks, must remain above the Zero Line for the duration of the setup. The Saucer method looks for changes in three consecutive bars, all on the same side of the Zero Line.
It entails two consecutive red bars with the second bar being lower than the first bar being followed by a green Bar.
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