Discussing the article: "MQL5 Wizard Techniques you should know (Part 52): Accelerator Oscillator"
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Check out the new article: MQL5 Wizard Techniques you should know (Part 52): Accelerator Oscillator.
The Accelerator Oscillator is another Bill Williams Indicator that tracks price momentum's acceleration and not just its pace. Although much like the Awesome oscillator we reviewed in a recent article, it seeks to avoid the lagging effects by focusing more on acceleration as opposed to just speed. We examine as always what patterns we can get from this and also what significance each could have in trading via a wizard assembled Expert Advisor.
The AO is useful for its early detection of Trend Reversals by focusing on shifts in momentum before price reversals. It also tends to be versatile across markets including forex, stocks, and commodities, plus it is relatively simple to interpret given the familiar histogram visual representation. So, to sum up here, practical use cases are in identifying entry-signals where in principle buying is when the AC is above the zero line and selling when it is below; plus trend confirmation where AC can work in tandem with other indicators such as the already covered Awesome Oscillator or even moving averages in affirming market trends.
It does, though, have its limitations, as with many indicators. Besides often requiring complementary indicators to confirm its signals, such as trend and volume indicators, it tends to lag a lot in Sideways or choppy markets. In addition, AO is generally sensitive to short-term price fluctuations, which makes it potentially prone to a lot of false signals. And finally, its zero line cross-overs are often less trustworthy than those of its counterpart the Awesome Oscillator, which speaking of it would be good to compare and contrast with AO before we delve into AO's patterns.
Since we have already covered the basic formula definitions of each, we will skip to their respective purpose and interpretation. The Awesome Oscillator (AO) shows overall market momentum and helps identify trends and reversals, while AC builds on AO to help show the rate of change of momentum to better gage whether momentum is picking up or decelerating. If AC is above zero and on the up and up, momentum is accelerating, if it is below zero and decreasing, then momentum is accelerating bearishness.
Author: Stephen Njuki