ASI was created by Welles Wilder as an ordinary fluctuations indicator that gets signals from previous maximums and minimums of price. Once, Wilder said: "Somewhere amidst the maze of Open, High, Low and Close prices is a phantom line that is the real market." What helps us reveal this phantom line is the accumulation index.
In his book "New Concepts in Technical Trading Systems", Wilder describes the indicator this way: "When the Index is plotted on the same chart as the daily bar chart, trend lines drawn on the ASI can be compared to trend lines drawn on the bar chart. For those who know how to draw meaningful trend lines, the ASI can be a good tool to confirm trend-line breakouts. Often erroneous breaking of trend lines drawn on bar charts will not be confirmed by the trend lines drawn on the ASI. Since the ASI is heavily weighted in favor of the close price, a quick run up or down during a day's trading does not adversely affect the index."
With the ASI attempting to show the "real market," it closely resembles actual prices. This allows usage of classic support/resistance analysis on the ASI. Standard analysis involves looking for breakouts, new highs and lows, and divergences. Wilder points out the following characteristics of ASI:
Accumulation Swing Index Indicator
ASI(i) = ASI(i-1) + SI(i)
Translated from Russian by MetaQuotes Software Corp.
Original code: https://www.mql5.com/ru/code/11
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The Average Directional Movement Index by Wilder (ADX Wilder) helps to determine the presence of the price trend.
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