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Accelerator/Decelerator Oscillator (AC)

Price is the last thing to correct. Before it changes, the market driving force slows down and nears zero level prior to changing its direction. Then it takes the opposite course and starts moving quite quickly until the price is changed.

Acceleration/Deceleration (AC) is a technical indicator that measures speeding up or slowing down of the market driving force. This indicator will reverse before the driving force takes the opposite direction which will head for the opposite shortly before the price correction. The AC gives quite an early signal. Bearing that in mind, you can have undeniable advantages.

As for the zero line, it is the place where the driving force is balanced with acceleration. If Acceleration/Deceleration is above zero, it is easier to speed up an existing upward movement and vice versa (assuming the case below zero). Unlike the Аwesome Оscillator, crossing zero line is not a signal. In order to control the market and take decisions, you need to carefully watch the color change. It is vital to know and remember: you shouldn’t buy if the color is red and shouldn’t sell if it’s green.

To enter the market on the basis of the driving force direction (Acceleration/Deceleration above zero at buying or below zero at selling), you need two green bars to buy (or two red bars to sell). In this scenario, when the driving force is against the opening position (the indicator below zero at buying, or above zero at selling), you need confirmation. In this connection, you need one extra bar. In other words, the indicator is needed to show three red bars above zero line for the short position, or three green bars below zero for the long position.

Calculation

ADX = SUM[(+DI-(-DI))/(+DI+(-DI)), N]/N

where

N - the number of periods used in the calculation.

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