Acceleration indicator

Acceleration/Deceleration (AC) – is the technical indicator of oscillator type measuring acceleration and deceleration of price. It was devised by Bill Williams Forex trader – an author of best selling books devoted to stock exchanges and a founder of the Profitunity Trading Group. According to author of this method, Acceleration/Deceleration is an important component of successful trading. It is explained by the fact that acceleration primarily speaks for change of price dynamic and as a result – change of market driving force. Thus, this indicator sends warning signals beforehand.

Measurement of АС bar graph:

where:

AO – Awesome Oscillator indicator;

Median Price – average (median) price;

High – highest bar's price;

Low – lowest bar's price;

SMA – a simple moving average;

AC indicator serves as third measurement in Bill Williams' Forex strategy. Author recommends using 5 and 34 periods because they provide the least number of false signals. Still many independent traders disagree with this statement and apply their own parameters.

In trading MetaTrader 4 terminal Acceleration/Deceleration indicator is represented as bar graph. By default growth periods are painted as green bars whereas decline periods are red. Zero lone serves as balance line between driving force and acceleration (pic. 1)

Pic. 1 – Acceleration/Deceleration indicator

Signals of АС indicator according to Bill Willams' strategy

1. Buying signal is above zero line. (AC>0)

Bar graph is above zero. Driving force is sent up. Signal is formed upon emergence of two subsequent bars with higher values than the least bar has. Pending order for buying (buy stop) is put for the high of signal bar plus 1 – 5 points of filter

2. Buying signal is below zero line.  

Bar graph is below zero. Driving force is sent down. Signal is formed upon emergence of two subsequent bars with lower values than the largest bar has. Pending order for sell (sell stop) is put for the low of signal bar minus 1 – 5 points of filter

3.      Buying signal is below zero line(AC

Bar graph is above zero. Driving force is sent down. Signal is formed upon emergence of three subsequent bars with higher values than the least bar has. Pending order for buy (buy stop) is put for the high of signal bar minus 1 – 5 points of filter

4.      Buying signal is above zero line. (AC>0)

Bar graph is above zero. Driving force is sent up. Signal is formed upon emergence of three subsequent bars with lower values than the largest bar has. Pending order for sell (sell stop) is put for the low of signal bar minus 1 – 5 points of filter

5.   The signal for purchase above zero line (AC>0)

It is important to remember that the first signal will always be touching of the first fractal. Only after that one can apply AC signals. In contrast to figures in Awesome Oscillator (АО), crossing of zero lines is not a trading signal. Crossing just decreases number of bar charts required for signal formation. If AC sends a signal and pending order is put, but prior to execution of order bar chart, will change its color, signal must be canceled.

Conclusion

As it was stated above, Acceleration/Deceleration indicator performs as third dimension in Bill Willams' strategy. Therefore, it is recommended to apply AC along with other tools (fractals, AO, zone trading and balance line) If to use indicator on its own, you also can get good results. But to decrease number of false signals, you have to determine dominating tendency beforehand and work exceptionally with a view to that side. It's not for nothing that Bill Willams always says «The trend is your friend».