Accelerator Oscillator

The Accelerator Oscillator, also known as the Acceleration/Deceleration Indicator (AC), is an indicator for the use of technical analysis in financial trading.

It was developed by American technical trader, Bill Williams, and measures the acceleration and deceleration of the current driving force.

This is represented by a series of red or green bars, thus can provide an early warning to potential trend changes.

Bill Williams developed the Accelerator Oscillator alongside his Awesome Oscillator.

Specifically, the Accelerator Oscillator is the difference between the Awesome Oscillator and moving average of a period of 5.

Essentially, the Accelerator tells us the rate of change of the Awesome. The AC possesses just a single line (zero line), and unlike a lot of the other oscillators which aim to catch potential reversals, the AC does not have any overbought or oversold levels.

Thus, if the green bars move from below the zero line to above the zero line, there’s a higher chance that bullish acceleration will continue, and if the red bars move from above the zero line to below the zero line, there’s a higher chance that bearish acceleration will continue.

It can also be a useful indicator to keep a trader out of the market; if the AC histogram is red, longs should not be considered, and if the histogram is green, shorts should not be considered.

How to Trade Accelerator Oscillator

The default view in trading the Accelerator Oscillator is pretty simple. Bill Williams suggests that if you’re looking to enter into a bullish trend, look for two consecutive green bars above the zero line.

If you’re looking to enter into a bearish trend, look for two consecutive red bars below the zero line.

It can also be used to enter at turning point, i.e. before the AC reaches the middle line, and in such a case, a trader is to look for three consecutive green bars below the zero line if seeking a bullish reversal.

Likewise, three consecutive red bars above the zero line if seeking a bearish reversal. A simple adjustment of the rules gives the trader an option to trade either trends or reversals.