Accelerator Oscillator (AC)
Accelerator Oscillator review
The Acceleration/Deceleration, Accelerator/Decelerator Oscillator, AC (fig. 1) is one of the technical analysis created by Bill Williams.
The essence of the oscillator consists in observing an approaching the change in the asset price, according to a change in the market driving force and even earlier. Bill Williams assumed that before the market driving force changes, its acceleration drops to zero, and then develops in a reversed direction. AC catches the moment when acceleration is decelerated. Thus, the Acceleration/Deceleration oscillator is designed as a very advanced oscillator.
Sign in by broker’s terminal, add the Accelerator Oscillator indicator to the chart, and see what happens
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Accelerator Oscillator Signals
Zero line intersection is a signal in itself for many Forex oscillators, but one of Acceleration/Deceleration oscillator characteristic features is that a zero line intersection is not a signal (Forex signals). However, the AC zero line (fig. 2) is the line indicating a certain balance between driving force and acceleration, therefore, if oscillator indicators are above zero, then the buyers dominate in the market, and if it is below then it means that the sellers dominate.
According to interpretation, AC is one of the simplest indicators, you can only monitor the colour change of the histogram columns and take correct decisions. In particular, buying is not recommended if the current column of a histogram is red, or selling is not recommended if the current column is green. When trading in a driving force direction, if Acceleration/Deceleration oscillator is above zero when buying or below zero when selling, then two green columns in a growing sequence shall mean a buy signal, and two red columns in a descending sequence (fig. 3) shall mean a sell signal.
When trading against the driving force, i.e., if the indicator is below zero when buying and above zero when selling, three green columns in an upward sequence below zero shall mean the buy signal, or three red columns in a downward sequence above zero level shall mean a sell signal.
Acceleration/Deceleration oscillator formula is based on values of another Williams indicator – Awesome Oscillator and shall be calculated as the difference between Awesome Oscillator and the 5-period moving average of Awesome Oscillator.
AC = AO — SMA (AO, 5)
AO = SMA (MEDIAN PRICE, 5) — SMA (MEDIAN PRICE, 34),
MEDIAN PRICE = (HIGH + LOW) / 2
MEDIAN PRICE — median price;
HIGH — maximum bar price;
LOW — minimum bar price;
SMA — simple moving average;
AO — Awesome Oscillator indicator.
It should be noted that Bill Williams himself suggested using periods 5 and 34, but their practical application revealed a large number of false signals with such parameters, that is why each trader determines his parameters as he/she familiarizes with the oscillator.
АС in terminal
Accelerator Oscillator (AC) is quite popular, therefore it is preinstalled on trading platforms. On MT5, it is in the Bill Williams list of indicators in the navigation panel on the left (fig. 4).
The oscillator is a histogram of red and green columns, a zero level line, and positive and negative values. Interpretation of colours in it is classic: the green colour shows the ascending price direction, the red colour – the descending one.
Strategies with АС
The Accelerator Oscillator should be used mainly as an additional indicator to other technical analysis tools анализа (Forex strategies). When using AC you also need to remember that it redraws the last column, so you do not need to open positions without making sure that the sequence is completely built.
Accelerator Oscillator is an integral part of strategies using other Bill Williams indicators, but it is often and quite effectively used with other indicators. On o the popular application ways of Accelerator Oscillator along with Awesome Oscillator и Stochastic (fig.5). The strategy is implemented on a timeframe H1 and above. AO and AC are set with predetermined parameters, Stochastic is set with parameters 8, 3, 3, the prices by «Close/Close», MA is simple.
Buy positions are opened when the stochastic% K intersects level 20 from the bottom up, and both Williams indicators will turn green. Sell positions are opened when%K line rosses the level 80 downward, and Awesome and Accelerator indicators will turn red. Accelerator/Oscillator can also be used only with Stochastic. The strategy is implemented on a timeframe H1 and above. Stochastic is set with parameters 5.3.3 and levels 20 and 80, an oscillator is set with standard settings. A buy signal is formed when the stochastic line intersects the signal line from the bottom up, and the AC columns are coloured green. Consequently, a sell signal is generated when the blue line intersects the red line from top to bottom and the AC forms red columns.
In another strategy, two moving averages with a period of 10 are added to Accelerator Oscillator and Stochastic, of which one strategy is built at the minimum prices, and the second strategy is built at the maximum prices (fig. 6). Stochastic is set with parameters, and the Accelerator Oscillator is set in a standard mode. The strategy is implemented on a timeframe H1 and above. A buy signal will be location of the stochastic signal line below the main one and their placement below level 50. The price should break through the MA built according to maximums. Then you need to monitor the dynamics of transaction and completely close the position when Accelerator Oscillator forms two red bars.
A sell signal will be the location of the stochastic signal line above the main one, provided that both of them should be located above level 50. The price should break through the MA built according to minimums. Then the transaction dynamics is monitored and it is closed completely when Accelerator Oscillator forms two green bars. Another strategy provides for using HMA with Accelerator Oscillator and Awesome Oscillator. Williams indicators are set with standard settings, and HMA is set with a period of 34. It is preferable to use a coloured NMA in this strategy, since the colour change of this line indicates the growth better.
Buy positions are opened when Awesome and Accelerator Oscillator is coloured green and is above zero level, and the HMA indicator shows growth in the direction and with a certain colour. Sell positions are opened when both Williams indicators are coloured red and placed below zero, and the HMA indicator line shows a decline. In another strategy the Accelerator Oscillator is used, along with Stochastic (5,3,3) and simple moving average with the period 33 (fig.7).
A purchase is made when АС is above zero line and coloured green, while the stochastic is above the central level of Accelerator Oscillator and the price is above the SMA. Sale is made when АС is below zero, the Stochastic is under the center line of the АС, and the price is under the moving average. The popular application method for Accelerator Oscillator is the strategy with Parabolic SAR, where also Awesome Oscillator is used. Williams indicators are set with standard settings, just like the Parabolic SAR indicator.
Buy positions are opened when the Parabolic SAR is below the price, and the Awesome and Accelerator oscillators will be coloured green. Sell positions are opened, when Parabolic is above the price and Awesome and Accelerator indicators will be coloured red. Bill Williams has developed a strategy for his indicators (fig. 8) that is used by many traders. It uses the Alligator, which determines beginning of the price movement and its direction, Accelerator Oscillator is required to determine acceleration or deceleration of the price, Awesome Oscillator remarks the price reversal, and such indicator like Fractals is used to determine entry points. The strategy is implemented on a timeframe H1 and above.
Trade entry using this strategy is to be carried out when the market is still in a quiescent state, subsequent actions are performed with an open position. Therefore, all Alligator lines should be placed on one plane in a stable state at the beginning of work, the Accelerator Oscillator and Awesome Oscillator should oscillate around the zero level. The trader determines the entry points according to fractals in this situation, and opens positions by the last fractal breakout. And then Williams recommends opening positions in the trend direction, according to the signals of fractals breakout.
Accelerator Oscillator can be used in a strategy with the Alligator only; in this case the signals are marked according to the Alligator indicator. This may be represented as an intersection of moving averages to be confirmed by Accelerator Oscillator. Using Accelerator Oscillator as the only trading tool is not recommended, although such strategies exist. One of these strategies involves trading on a timeframe H4 or above, and its essence is to open positions at certain bars. For example, when the 61st bar is closed, the buy position opens at the 62nd bar, provided that the AO is placed below zero. Sale positions is performed are opened at the 62nd bar, if the oscillator is placed above zero level.
According to another version, positions are opened according to Accelerator Oscillator indicators of previous 80 bars, buying positions – after the 80th bar has closed and opens the 81st bar, provided that AO is below zero level, opening positions are opened after closing of 80-th bar, on the 81st bar, if the Accelerator Oscillator indicator values are above zero level. This strategy is often positioned as a very simple and profitable one, it does not even involve using of stop losses. But it cannot be actually used without trading experience, without support by other tools. Accelerator Oscillator does not provide sufficient information for a complete strategy.
Accelerator Oscillator can be used when working with any assets and on any timeframes. It is an advanced and gives simple signals that are clear for understanding and it is quite strong. The disadvantages include that it is practically not applicable without other indicators and gives few signals, therefore its capabilities are limited. Ax can be used as an extra tool very effectively in many strategies.