Average Sentiment Oscillator

Market performance is gained through consistent practice, which can be obtained by trying many technical indicators, one of which is the Average Sentiment Oscillator Indicator. Traders use this tool to assess the general market atmosphere and have a good picture of what is going on. The Average Sentiment Oscillator is a dynamic medium that completely captures the average bull/bear percentages. The indicator is an improvement on the methodology used in the sentiment meter module of the FX Multimeter III indicator.

What is the Average Sentiment Oscillator?

The Average Sentiment Oscillator measures market volatility and currency strength/weakness. This indicator enables traders to forecast the likely destination of a price movement by understanding the status of the market trend and its level of stability. Furthermore, it keeps you aware of the sidelined market, allowing you to prevent disastrous bets during short momentums. Aside from that, you can use it to trade any foreign currency pair in the market.

Setting up the Average Sentiment Oscillator
Setting up the Average Sentiment Oscillator

Average Sentiment Oscillator Strategy

Average Sentiment Oscillator was created by combining bull and bear power with a 10-day ASO Moving Average. Its blue curve rises above the red curve when the momentum is positive and falls when the momentum is negative. When the momentum increases, the gap between the curves widens. When the trend is neutral, both curves move closer to zero, indicating a “no-trade” situation. When used with other trend-following tactics, this oscillator may aid in identifying the right trend condition.

Buy Signal

The following could be your checklist for a buy trade:

  • When the indicator curves plot a bullish crossover.
  • When the distance between the curves gets wider.
  • When the price bar closes as a solid bullish candle at the same time.

Once these events occur:

  • You could open a buy position after you confirm your entry with bullish candlestick patterns.
  • You could set your stop loss just below the nearest swing low.
  • You could set your take profit at the nearest resistance zone, or you could exit trade when the indicator curves plot a bearish crossover.
  • For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
Average Sentiment Oscillator Buy Setup
Average Sentiment Oscillator Buy Setup

Sell Signal

The following could be your checklist for a sell trade:

  • When the indicator curves plot a bearish crossover.
  • When the distance between the curves get wider.
  • When the price bar closes as a solid bearish candle at the same time.

Once these events occur:

  • You could open a sell position after you confirm your entry with bearish candlestick patterns.
  • You could set your stop loss just above the nearest swing high.
  • You could set your take profit at the nearest support zone, or you could exit trade when the indicator curves plot a bullish crossover.
  • For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
Average Sentiment Oscillator Sell Setup
Average Sentiment Oscillator Sell Setup

Average Sentiment Oscillator Pros & Cons

Pros

  • The Average Sentiment Oscillator may be used to assess the general market atmosphere and have a good picture of what is going on.
  • This indicator may help traders know the strength of currencies.

Cons

  • The Average Sentiment Oscillator parades just a handful of Input Variables, thereby minimizing the trader’s customizable options.
  • This indicator may not meet the trader’s expectations in a narrow-ranging market on smaller timeframes.

Conclusion

The Average Sentiment Oscillator Indicator is advantageous to your trading experience not only because it is simple to use, but also because it can be combined with other technical indicators. You don’t have to devote countless hours to mastering this indication. All it takes is some of your time to properly understand how it works. This could be an ideal tool for day trading because it provides some good medium- and long-term indications. Note, however, that it does not guarantee profits.

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