However, more aggressive traders use the Bill Williams Accelerator Oscillator system differently. It is similar to trading based on overbought and oversold areas in the market, known from trading systems based on the RSI indicator. This strategy is to take a position as opposed to how the indicator histogram is formed. It means that the trader decides to take a long position when the Accelerator Oscillator is below the zero line, and vice versa — when the Accelerator Oscillator is high above the zero line — a short position.
To add it to your chart in Metatrader, click “Insert”, choose “Indicators”, «Bill Williams» and then “Accelerator Oscillator”. Harness the market intelligence you need to build your trading strategies. Harness past market data to forecast price direction and anticipate market moves. Trade up today — join thousands of traders who choose a mobile-first broker.
Like Awesome Oscillator, Accelerator Oscillator was also developed by Bill Williams. Its aim is to forecast the price changes through measuring acceleration or deceleration of the current market driving force. This is possible because, according to Williams, the price usually starts moving slower before a reversal. As a result, Accelerator Oscillator changes direction slightly before the change in momentum.
How to use the awesome oscillator
In this particular indicator, the indicator looks at momentum and when that changes. After all, if the momentum in an uptrend is starting to slow down, that could suggest that there is less interest in that financial asset. In the inverse, momentum to the downside will start to slow down before buyers come in and pick the market up or simple short covering happens. Williams stressed that with Accelerator Oscillator, you should not buy if you see a red bar, and you should not sell if you see a green bar. You should also keep an eye on both the color of the indicator and whether the values are above or below zero.
You shouldn’t buy if you see a red bar and you shouldn’t sell if the last bar is green. One of the disadvantages of this tool is its dependence on other indicators. If, for example, the Relative Strength Index can be used independently and generates quite reliable signals, then Bill Williams Accelerator Oscillator is significantly inferior to it. Williams himself suggested using the Alligator Indicator as the main indicator. In this case, the Awesome Oscillator and Accelerator Oscillator may work as more sensitive tools to confirm signals from the Alligator.
Thus, although the Accelerator Oscillator itself generates rather weak signals, in combination with other indicators it is a very useful tool for technical analysis. Another disadvantage of the indicator can be considered a smaller number of signals and capabilities than any other oscillator. For example, Stochastics allows you to trade from areas of overbought and oversold or from the intersection of the signal and main lines, and MACD, also, allows you to use divergences. The green color, regardless of the direction of the indicator, warns against short positions, and red, respectively, against long positions. In case the Accelerator Oscillator is below zero, the signal to buy may also be the presence of three consecutive green bars.
Accelerator/Decelerator Oscillator
Many timeframes can be used to set the awesome oscillator, whether this be minutes (extreme short-term), hours (short-term), days (medium-term) or months (long-term). And even later on the chart, you can see that price was rising again, but this time the histogram in the indicator didn’t rise above the previous time. Notice how the indicator started to drop from that level, forming several red bars.
The Accelerator Oscillator changes its direction after a change in the driving force, which usually indicates a possible trend change. The purpose of this tool is to identify acceleration points in the price and demonstrate positive or negative dynamics. This indicator is one element of the Bill Williams Profitability trading strategy. Before price changes, the market driving force changes, and before it changes its direction, the acceleration of the driving force must slow to zero.
One of the great aspects of the Bill Williams Accelerator Oscillator is that it can function as an early warning system. For example, if you start to see price rising but the Accelerator Oscillator rolling over, that can be the first sign of trouble. It functions very much like divergence in any other oscillator, when momentum is moving opposite of price. Join thousands of traders who choose a mobile-first broker for trading the markets. It is important to remember that it is best to use these signals for entry one time at each crossing of the zero line indicator. When we open a trade after crossing the Accelerator Oscillator of the zero line, the next trade can be opened only at the reverse intersection.
After determination of the base settlement price , the exponential sliding average with the period 5 is calculated − EMA, or «fast» average, and similar «slow» average EMA. The difference between values of these MA gives data for creation of the Awesome Oscillator indicator. The central line of the indicator – the level at which acceleration of the price is balanced with the driving force of the market. Accelerator Oscillator is calculated as the difference between the Awesome Oscillator and 5-period simple moving average of the Awesome Oscillator.
Using the Bill Williams Accelerator Oscillator
Before the direction of bars on the graph changes, the momentum will change first, and the change of accelerator which will be preceded by the change of the volume will take place previously. But everything starts with the fact that we – traders – will make our own trading decisions, so everything starts with us. The Bill Williams Accelerator Oscillator is an indicator that measures whether momentum is likely to continue. When you add the indicator, it opens up a window at the bottom of the platform, like most other oscillators. It has a zero line, showing whether it’s going to be easier for acceleration or deceleration to increase in momentum. So, we have the Awesome Oscillator histogram, which shows us the driving force, but to estimate whether the price is accelerating towards it or not we will need Accelerator Oscillator.
If the awesome oscillator crosses above the zero line, this signals bullish momentum, but if it crosses below the zero line, this signals a bearish momentum. This can easily change, so the awesome oscillator aims to detect whether a trend is continuing or starting to reverse. The below chart shows how green lines indicate bullish momentum and red lines indicate bearish momentum on a price chart.
These both suggest a possible reversal against the previous price trend. If an asset’s price decreases below the zero line, traders may be more likely to open a short position, instead of a long position, which may be more favourable when the price starts to increase to above the zero line. For example, when the oscillator crosses above or below the zero line, this is not seen as a trading signal, but instead simply shows signs of bullishness or bearishness.
Accelerator Oscillator and Its Signals
Later on, you can see that price had been rallying and forming several green bars in a row. The indicator will not only suggest when the direction of momentum starts to change, but it also looks at whether there is an acceleration in the change of momentum. This is very useful information because it can lead to an opportunity to close out a trade that is profitable, or perhaps open up a new one relatively early in the trend change.
Quite effective filtering is obtained in intraday trading and when using the Accelerator Oscillator on daily charts. One should remember that the Accelerator Oscillator signals are only confirming, and the main signal is always the touch of the first fractal. Only after this touch, you can place orders according to the Accelerator Oscillator signals.
Using the Accelerator Oscillator in MetaTrader 4
The Forex Accelerator Oscillator is designed by renowned trader Bill Williams specifically to provide early warning signals of the changing force driving the market. And today, we will learn what the Accelerator Oscillator is, as well as how to use it in trading. The concept of Bill Williams contains five measurements, the third of which is used to determine accelerator or decelerator of the driving force. Awesome Oscillatorallows a trader to determine the momentum, but to interpret its force more accurately, Accelerator Oscillator is required.