The Accelerator Oscillator (AC) indicator was developed by Bill Williams in his book - 'Profitunity (Chaos) Trading System'. It is one of the indicators that is used in his Trading System.
The Accelerator Oscillator is a built from the Awesome Oscillator - it is the difference between the AO and its 5-Period Moving Average. This shows the delta, the acceleration of the Awesome Oscillator indicator, and can show possible trend reversals before the Awesome Oscillator identifies them.
How To Trade
The Accelerator Oscillator can be traded in various way. The most simple one is using its zero-line cross for trading signals - when the AC crosses zero from below enter long, and when it crosses from above enter short. However, these signals are generally weak. Do not trade when AC indicator changes colors - these are extremely unreliable signals that should not be traded.
The AC is best used to confirm Awesome Oscillator signals, as the Saucer entry. The Saucer entry occurs when Awesome Oscillator changes from Red to Green when it is above the Zero line (or the opposite for short). When facing with a Saucer entry, a confirmation from the AC indicator can increase the probability of success and enhance the performance of the system.
The AC can also be used as an exit mechanism for signals taking by the Awesome Oscillator. Because it spots a change in trend earlier than the Awesome Oscillator, it can notify to close open positions before the Awesome Oscillator signals.
Awesome Oscillator = SMA(Median_Price, 5 Periods) - SMA(Median_Price, 34 Periods)
Accelerator Oscillator = Awesome Oscillator - SMA(Awesome Oscillator, 5-Periods)
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