How to Use The Accelerator Oscillator For Forex Trading
The Accelerator Oscillator indicator helps detect different trading values that protect traders from entering bad trades. It identifies if the market momentum is going to continue, stall, or reverse. In this article, we take a deep dive into the Accelerator Oscillator indicator.
What is an Accelerator Oscillator?
Technical analyst Bill Williams developed the Accelerator Oscillator indicator to better understand the market’s changing momentum. The indicator consists of red and green bars depicting when not to buy or sell a trade.
- When the last bar in the currency pair price chart is green, it signals traders not to enter buy orders.
- When the last bar in the currency pair price chart is red, it signals traders not to enter sell orders.
The Accelerator Oscillator shows when an uptrend or downtrend momentum in the market is slowing down and provides traders with opportunities to close profitable trades before the market loses its momentum.
How to read the Accelerator Oscillator
When there are multiple green bars on a forex price chart, it indicates bullish market momentum. This indicates that there are more buyers than sellers in the market, and prices are continuously rising. It signals traders to place buy orders above the centreline. The higher the green bar reaches in the histogram, the stronger the bullish momentum is. The centreline or zero line is the line that depicts a balanced momentum, which means that the market is neither bullish nor bearish at this point. Red bars, on the other hand, indicate a bearish market momentum and indicate that there are more sellers than buyers in the market. It signals that prices are falling, and traders should place sell or short orders below the centreline. The lower this red bar is, the stronger the bearish market momentum is. You can also spot reversals with the Accelerator Oscillator indicator. When the bars change their colour from red to green, it means that the downtrend is ending and an expected uptrend is occurring, signalling traders to long their trades. On the other hand, a shift from green to red bar depicts a bearish market momentum signalling traders to short their trades.
How to calculate the Accelerator Oscillator
The Accelerator Oscillator can be calculated with multiple moving averages. It consists of a fast-moving average and a slow-moving average that is depicted through a histogram under the currency pair’s price chart. The difference between the fast-moving average and the slow-moving average is the Awesome Oscillator's value. The Awesome Oscillator is also a Bill Williams indicator that compares the currency market price movement with its historical price movements to enter or exit a trading order. Thereafter, the Accelerator Oscillator can be calculated by subtracting the 5-period simple moving average of the Awesome Oscillator from the Awesome Oscillator itself.
How to trade with Accelerator Oscillator
Since the Accelerator Oscillator helps eliminate bad entry timings, it is essential to look at both the currency pair’s fluctuating values and the colours of the bars. Too many red bars occurring together signal that you should not place buy/long orders, and too many green bars occurring signal that it is not the right time to place sell/short orders. You can also trade with the Accelerator Oscillator based on when the indicator crosses the zero line, which indicates a change in the market momentum.
- When there are two or more green bars above the zero line consecutively, traders receive a signal to long or buy a trade due to expected bullish market momentum. However, If you want to place buy/long orders when the indicator is below the zero line, you need three or more green bars occurring consecutively to trade along with the bullish market momentum.
- When there are two or more red bars below the zero line consecutively, traders receive a signal to short or sell a trade due to an expected bearish market momentum. However, if you want to place short/sell orders when the indicator is above the zero line, you need three or more red bars occurring consecutively to trade along with the bearish market momentum.
Trade with the Accelerator Oscillator to better time your entries
The Accelerator Oscillator helps in identifying the right time to enter and not enter a trade in the forex market. It provides traders with the current market momentum and helps them determine if long or short orders need to be avoided in the current market scenario. Start trading Blueberry Market’s forex trading platform to access all Bill Williams indicators and use them together to receive confirmed trading signals about your favourite forex pairs. Sign up for a live trading account or try a risk-free demo account.
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