The Accelerator-Decelerator Indicator

Definition of the Accelerator/Decelerator Indicator

The Accelerator/Decelerator indicator is an oscillator which was created by Bill Williams and is thus classified as a Bill Williams indicator under the MT4 indicator suite. The indicator was created as a means to identify the basis of price action. As discussed in Bill Williams’ book known as Trading Chaos, the price action of a currency pair results from the slowing of momentum almost to zero (deceleration), as well as increase in momentum in the opposing direction (acceleration).

Momentum defines price. So the job of the Accelerator-Decelerator oscillator is to detect whether the forces that push price action in whichever direction are accelerating or decelerating.

AC

Usage of Indicator

In forex, the Accelerator Decelerator indicator can be used in a number of ways: From the numerous strategy articles we have on this site, it is evident that this indicator is a very important indicator.

  1. a) The coloured MACD indicator can be used in trend detection, usually as a component of a strategy or in conjunction with other trend indicators such as the Parabolic SAR or moving averages.
  2. b) The indicator also serves as a momentum indicator. The height of the coloured bars show how strong a trend movement is, and can also indicate if a move has gone too far and is about to undergo correction or reversal.

Indicator Settings

There is really no need to adjust any settings on the indicator window. Perhaps the only setting worthy of adjustment is the two colours that make up the colour-change identification system. It is suggested to leave the deceleration signal colour as red and the acceleration signal colour as green. However, traders who want to conduct historical studies may have to make some other adjustments as follows:

1) Number of Bars

Some older versions of this indicator which pre-date the launch of the MT4 Build 600 cannot go back so far. You can solve this issue by manually increasing the number of indicator bars to at least 1,000,000. This is done using the indicator pop-up window.

2)  Line Thickness

For better visualization, you will also need to thicken the bars of the indicator. This can be done by calling up the indicator on the Indicator List (Ctrl + I) -> Edit-> Colours -> Width. Then choose the desired line thickness from the drop-down menu.

The indicator is a native indicator to the MT4 platform. To add it to the chart, do the following:

  1. Open the MT4 chart.
  2. Click Insert -> Indicator -> Bill Williams -> Accelerator
  3. AC1

Usage of Envelopes in Forex Trading

How is the Accelerator-Decelerator (or AC indicator) used in trading forex?

a) Trend Identification

Acceleration of momentum is expected to result in bullish price action, and this is connoted by the bars of the Accelerator indicator appearing green. When the indicator is red in colour, it means that the momentum of price is decelerating. Please note that green bars considered relevant to a long trade setup must be above the zero line in the indicator window, and red bars relevant to a short trade setup are those which are found below the zero line.

b) Trading With Candlesticks

On its own, the AC indicator is incapable of producing signals that can be traded directly. It must be used as part of a trading system, or with candlesticks.

The AC indicator is not a good gauge of support and resistance and cannot be used in this manner.

Trade Example
Step 1

Open the chart of the currency to be traded and setup the AC indicator with its default settings.

Step 2

Determine the strategy that you want to trade and apply the other relevant indicators. Here we want to use candlestick patterns to trade with the AC indicator.

For a long trade, look for a bullish candlestick pattern to occur when the bars of the AC indicator are green in colour, and are located to the upside of the zero line in the indicator window. If the AC indicator is green but the bars are still located below the zero line, this only means that the downtrend has stalled and alerts the trader to get set for a long trade.

AC_long

For a short trade, look for a bearish candlestick pattern to occur when the bars of the AC indicator are red in colour, and are located below the zero line in the indicator window (i.e. negative territory in the indicator window). If the AC indicator is red but the bars are still located above the zero line, this only means that the uptrend has stalled and alerts the trader to get set for a short trade.

AC_short

Precautions

Use charts which are from one hour time frame and higher time frames. Also, since the AC indicator is not useful in detecting support and resistance, you must use other means of assessing support and resistance levels to see if it is ok to enter trades at the signal areas. So an AC indicator sell signal should be ignored if the price is too close to a support level as the trade will not get far at all. Likewise, AC indicator signals that indicate a long trade should not be taken if they are too close to a resistance zone.

Make sure you practice how to trade each setup on a demo account before using the indicator to trade real money. Also pay attention to risk management.

Leave a Reply