AIMS Indicator 2: AIMS Wave

The AIMS Wave indicator is a modified version of Bill Williams’ Awesome Oscillator. Awesome oscillator was introduced in Trading Chaos first and 2nd edition.

What is the Awesome Oscillator?

The awesome oscillator is a technical indicator that is used within the financial markets to confirm or disprove trends on price charts. These charts compare current data to historic data with the aim of predicting momentum in the markets.

What is The AIMS Wave Indicators?

AIMS Wave is based on the Bill Williams Awesome Oscillator Indicator. It is a 34-period simple moving average, plotted through the middle points of the bars (H+L)/2, which is subtracted from the 5-period simple moving average, built across the central points of the bars (H+L)/2.

It shows us quite clearly what is happening to the market driving force at the present moment – it shows momentum.

Above the Zero Line, it remains green and dark green. Below the Zero Line it remains red and maroon.

What is ‘WAVE Close to Zero Line’?

It means that AIMS WAVE bars are close to the Zero Line – it looks like below.

We take Setups when AIMS WAVE is close to the Zero Line. The AIMS WAVE is the most important indicator in terms of momentum and wave counting. It shows the waves very clearly that the Zero Line is the: –

Point of Equilibrium
Peak of the mountain
Balance point
Pivot point.
The tipping point from where the boulders roll down the hill.

The Butterfly Flap of the Butterfly Principle starts here.

I cannot put enough emphasis on this point – Please Understand it

Time Entries with The Break of AIMS Box and Fresh Cross of Zero Line

One more important thing

If you do not get Setups close to a FRESH cross of AIMS WAVE, it would be best to wait for the NEXT Setup and time your trade entry with the cross of the AIMS Wave Zero Line. AIMS WAVE shows a wave and its momentum from peak to peak, on either side of its Zero Line.

When the price goes sideways, it comes close to the Alligator Lines. When the Alligator sleeps, AIMS WAVE comes close to its Zero Line, showing there is no momentum in the market. When the price starts moving, it moves away from Alligator lines and AIMS WAVE shows rising momentum.

Below is an example of a fresh Cross of Zero Line and breakout of the AIMS Box

AIMS Wave Shows Momentum

Red Bars: Momentum of the Wave is down and Increasing
Possible Impulse Wave down

Maroon Bars: Momentum of the Wave is down but decreasing
Possible Corrective Wave up

Light Green: Momentum of the Wave is up and Increasing
Possible Impulse Wave up

Dark Green: Momentum of the Wave is up but decreasing
Possible Corrective Wave down

When the AIMS WAVE bars change to darker tones i.e. from lime green to dark green, for up-trends, and from red to maroon, for down-trends, we stop trading.

When it resumes in the direction of the trend we start trading. We wait for AIMS WAVE to come back to the Zero Line.

The Zero Line is the level where AO changes colour

Market Moves in Waves

We all know that the market moves in waves. Our charting software proves that to us every second, every minute. Price does not go up and down in a straight line – it creates waves.

Up-Trend: Waves taking the price up are longer than the waves bringing the price down again.

Down-Trend: Waves taking the price down are longer than the waves bringing the price up again.

AIMS Wave Shows the Up and Down Waves and its Momentum

In an up-trend the wave going up is longer than the wave going down and vice versa for down-trends – AO captures those waves very nicely.
AIMS AO displays these waves in the form of a histogram.
Consecutively longer bars show rising momentum.
The Zero Line is normalisation – it is the equilibrium point where the buyers and sellers agree on price.
On the other hand, peaks of AO show abnormal levels, where price cannot stay too long and buyers and sellers will seek to take control from one and other.
Likewise, price cannot stay at equilibrium point for long too, it must break that equilibrium soon and let the dynamics of the market form a new trend. And so it continues, to and fro like this forever.
Understanding this defines our Edge.

In the picture above, I have drawn a line depicting the wave as I see it, using both the price relative to Alligator and AO. The major AO peaks help me see the overall wave; the little peaks on the AO show me the waves within waves. AIMS Boxes also compliment each wave within wave. Note that all the major trends/moves/waves start and end with an AIMS Box, as do the minor waves.

AIMS Stress-Free Trading – 10Sec Elliott Wave eBook – How to use AO to Count Waves and Time Entries and Exits

I recommend reading AIMS Stress Free Trading – 10Sec Elliott Wave eBook. Download the the book FREE. It explains in detail how we use AIMS Wave to trade the markets. It also discusses, with illustrations, how to count the Elliott Wave using AIMS Wave.

In the picture below, we have a Setup on M5 and on M1. (Now I’m going to speak some Elliott Wave language, if you’re allergic to Elliott Wave then protect your eyes now J )

AO has peaked red, once on M5 to the left, showing Wave 3. After a peak of AO, we wait for a retrace. Price comes back to Alligators mouth and AO bars come close to its Zero Line.

Based on the peak of AO to the downside, after the retrace has completed we expect a 5th wave down and hence we wait for a short Setup on M1, into the possible 5th wave of M5. More on this in AIMS Stress Free Trading – 10 Sec Elliott Wave eBook.