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Trading with the Accelerator Oscillator(AC) indicator

How to use the Accelerator Oscillator for Forex Trading. Definition, detailed view , advantages, calculation and trading strategies of AC indicator.


Everyone involved in trading Forex knows that there are many technical tools used in financial markets. Some of these tools were developed by the famous American trader Bill Williams. He conducted some studies to use Chaos Theory in trading, and we have provided information about these in our previous articles. In this article, we will discuss one of Bill Williams’ works called the Accelerator Oscillator (AC). This indicator is used to understand price movements and capture trend changes based on Chaos Theory. Bill Williams has argued that financial markets are inherently chaotic and exhibit complex and random movements instead of following a specific pattern. Therefore, Williams’ trading approach emphasizes that predicting price movements is complex and not exact.


What is the Accelerator Oscillator (AC)?

The Accelerator Oscillator is an indicator used to measure the difference between changes in price on a price chart and price momentum. This oscillator contributes to our understanding of the speed and momentum of the current trend. The basic logic of the oscillator is to assess the momentum and momentum of price movements. In other words, it calculates the change in momentum by calculating the difference between moving averages. Differences between acceleration and deceleration help us identify strong and weak movements in the market. The indicator typically has the capacity to generate buy and sell signals, and it is displayed in a histogram format with positive or negative values. Positive values reflect rising price momentum, while negative values reflect falling price momentum.

Structure of Accelerator Oscillator

The structure of this indicator is formed by representing the difference of moving averages as a histogram, and it consists of the following components:

Zero Line: Generally, a zero line is placed at the center of the histogram. This line acts as a divider between positive and negative values. Positive values are usually above the zero line, while negative values are below it.

Histogram: The difference of moving averages is added to the graph in the form of a histogram. The histogram is typically displayed as a bar chart. The difference between positive and negative values is represented by the height of these bars. The columns of the histogram are often filled with different colors to visually represent positive and negative values. Positive columns are often colored green or blue, while negative columns are red or orange. However, we can customize these colors if we wish.

This structure constitutes the main features of the Accelerator Oscillator. We use the height and colors of the histogram to understand changes in momentum and price movements.


Trading with the Accelerator Oscillator


Buying Order (Long Position):

When trading with the Accelerator Oscillator, if positive values emerge or rise above the 0 line, it signifies increasing momentum and strength. During such times, we commonly place a Buy order. In a period where the positive columns in the histogram are growing and the price is moving upwards, we also enter a Buy order. Additionally, if we encounter positive divergence in the indicator, it means we have a good opportunity to place a Buy order. Let’s take a look at an example on the German Stock INDEX (DAX) chart below:

Trading the financial markets with positive and negative divergences using the Accelerator Oscillator (AC) indicator.
AC Indicator in the DEU40 chart

Selling Order (Short Position):

Moments when negative values appear or drop below the 0 line indicate decreasing momentum and strength. In this scenario, a Sell order would be relevant. If the negative columns in the histogram increase, we place a Sell order considering that the price will likely move downwards. Additionally, if we come across negative divergence in the indicator, it means we’ve found a great Selling opportunity. An example is provided in the chart above.

Note: While the Accelerator Oscillator and the Awesome Oscillator may appear visually similar, they differ in purpose and calculation methods. The Awesome Oscillator focuses on measuring market momentum and trend changes, whereas the Accelerator Oscillator is more geared towards measuring the momentum of price movement, indicating the direction and change of price momentum through positive/negative values. Moreover, the Awesome Oscillator is composed of the difference between fast and slow moving averages. The fast moving average uses a 5-period, while the slow moving average employs a 34-period. On the other hand, the Accelerator Oscillator is also based on the difference between moving averages, but it uses a shorter calculation period instead of a specific period. It highlights the difference between positive and negative values.

Keep in mind. Sudden fluctuations or small changes in price movements in the Forex market can lead to misleading signals from the Accelerator Oscillator. Market conditions do not always work the same way, and during such times, this oscillator may fall short in identifying trend changes. When trading in financial markets, relying solely on one indicator leaves the market analysis incomplete. It is important to pay attention to other analytical tools and market conditions when making trading decisions.

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