So, let me simplify this for you. Oscillators are my trusted partners when I’m navigating the rough waters of stock trading, especially when the price action is flat – you know, like when the stock is just hanging out without a clear trend, bouncing sideways.
Enter the Accelerator Oscillator (AO), which comes from Bill Williams' toolkit. This guy doesn’t stop there; he’s also behind other important tools like the Alligator, Fractals, and the Awesome Oscillator. Quite a lineup, right?
Most trading platforms include the Accelerator Oscillator in their features. You’ll definitely find it in the comprehensive range of strategies offered by Pocket Option trading platform broker's offerings for binary options.
Understanding the Accelerator Oscillator’s Numbers
Visually, AO looks a lot like the Awesome Oscillator. We’re talking about a stylish histogram with red and green bars showing up above and below the zero line.
But here’s the catch: the calculation of AO is what makes it unique. It's calculated by taking a simple moving average with a 5-period from the Awesome Oscillator value. Sounds tricky? Nah, it’s all done for you. Just input what you need, and there you go! You’ve got your histogram.
Sticking to the basics, Bill Williams advises us to use the values of 5, 34, and 5. And guess what? That’s the default in the Pocket Option terminal.
Trading with the Accelerator Oscillator – My Approach
According to the genius who created this tool, price action tends to speed up or slow down as the trend develops. Picture this: during a hot trend, prices are bouncing around, but just before a reversal, the excitement starts to fade.
I keep a close watch on the histogram bars; if they get smaller, it means things are slowing down, while larger bars indicate acceleration! The position of the bars relative to zero isn’t crucial, but pay attention to the color; that's where the action is.
Oh, and to enhance my strategy, I like to use the Accelerator Oscillator alongside the Awesome Oscillator. Trust me, this combination works wonders. Here’s how:
- I look to take a CALL option when the histogram bars are growing tall and looking green on both oscillators. Plus, the closing price of the last candle should be higher than the one before it.
- If I see both oscillators showing red and the bars are getting bigger, I’m all for a PUT option, especially if the current candlestick is closing lower than the previous one.
Don’t forget, you want your expiry set for about 3-4 bars out.
Focus on trading with this system on lower timeframes, like up to a minute.
In summary, just like most of Bill Williams’ tools, the Accelerator Oscillator is a powerful instrument. It gets ahead of the curve, which really helps reduce the risk of jumping in just as the movement’s finished.
I rely on this trend indicator to spot short-term overbought or oversold signals. When the oscillator climbs toward the upper extreme, I quickly call it overbought. But if it's dropping to the lower extreme, I'm definitely sensing it’s oversold.
