AC (Acceleration oscillator)
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Acceleration oscillator is one of the most popular indicators developed by renowned technical analyst Bill Williams. Williams argued that the direction of momentum will always change ahead of price, so looking at momentum rather than price gives you a timing advantage. The acceleration indicator 'plays ahead' and helps to detect early changes - impulse acceleration or deceleration.
Williams stated that the impulse direction will change before the trend reversal, and the impulse acceleration can be observed just before that. The Acceleration oscillator (also known as the acceleration/deceleration indicator) is an indicator that Bill Williams developed to provide early signals of changes in market power.
The Acceleration oscillator is considered a forward-looking indicator since before the reversal, the price must reduce the speed of movement in the current direction, which means that you need to have data on price acceleration (positive or negative). When the dynamics slow down, the indicator's histogram should unfold first, and grow when the current dynamics accelerate.
Acceleration oscillator is able to quite accurately predict the phases of price dynamics in advance, which is valuable for traders - its advantage lies in leading indications.
In the case when the AC indicator is below zero, the presence of three successively growing green bars can serve as a signal to buy. The same is true for sales.
The main parameters concern the appearance of the histogram, the user can select the desired color and line thickness. The following colors are used by default:
Green - to indicate an increase in price, that is, an increase in acceleration;
Red - to indicate a decrease in price, that is, an increase in deceleration.
The indicator looks as follows on the chart:
