Accelerator Oscillator

The Accelerator Oscillator (AC) indicator was developed by Bill Williams in his book 'Profit unity (Chaos) Trading System'.

The Accelerator Oscillator is considered a progression of the Awesome Oscillator as it can show possible trend reversals before the Awesome Oscillator identifies them.

The Accelerator Oscillator can be used in various ways. The simplest way is when the indicator crosses the zero line. If it crosses from below then this signals an upward trend indicating for you to trade long. If it crosses from above then it is entering a downward trend suggesting traders to trade short. This is known as the zero-line cross. However, these signals are often weak and it is advised that traders do not trade when the indicator changes color.

The indicator is best used to confirm Awesome Oscillator signals when the Awesome Oscillator changes color; from Red to Green suggesting to go long, or from Green to Red suggesting shorting. Confirming suspected trends with other indicators increases the probability of success and the robustness of your trading strategy.

This indicator can also be used to determine when to exit a trade. It spots a change in trends relatively early and hence can prepare you to close open positions before the Awesome Oscillator would.

Calculation

AC = Awesome Oscillator – SMA (Awesome Oscillator, 5-Periods)
SMA = Simple Moving Average