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Acceleration/Deceleration Technical Indicator (AC) measures acceleration and deceleration of the current driving force. This indicator will change direction before any changes in the driving force, which, in turn, will change its direction before the price. If you realize that Acceleration/Deceleration is a signal of an earlier warning, it gives you evident advantages.
The naught line is basically the spot where the driving force is at balance with the acceleration. If Acceleration/Deceleration is higher than naught, then it is usually easier for the acceleration to continue the upward movement (and vice versa in cases when it is below naught). Unlike in the case of Awesome Oscillator, it is not regarded as a signal when the naught line is crossed. The only thing that needs to be done to control the market and make decisions is to watch for changes in color. To save yourself serious reflections, you must remember: you can not buy with the help of Acceleration/Deceleration when the current column is colored red, and you can not sell, when the current column is colored green.
If you enter the market in the direction of the driving force (the indicator is higher than naught, when buying, or it is lower than naught, when selling), then you need only two green columns to buy (two red columns to sell). If the driving force is directed against the position to be opened (indicator below naught for buying, or higher than naught for selling), a confirmation is needed, hence, an additional column is required. In this case, the indicator is to show three red columns over the naught line for a short position and three green columns below the naught line for a long position.
Calculation
The AC bar chart is the difference between the value of 5/34 of the driving force bar chart and the 5-period simple moving average, taken from that bar chart.
AO = SMA(median price, 5)-SMA(median price, 34)
AC = AO-SMA(AO, 5)
Where:
SMA — Simple Moving Average;
AO — Awesome Oscillator.