It is good to use the oscillator in conjunction with the market price chart and other trend-following indicators that can confirm or deny its trading signals.
ASI (Accumulation Swing Index)
ASI (Accumulation Swing Index) is a popular momentum oscillator from the Marletscope 2.0 list of standard indicators. It was developed by J. Welles Wilder and introduced in his New Concepts in Technical Trading Systems book in 1978.
ASI helps to monitor an instrument's price momentum or, in other words, the speed of the price change.
It is believed that momentum always foreruns and influences the price changes. The greater the momentum is,
the faster an instrument's price changes, and the faster it changes, the stronger the price trend is.
ASI calculates its values as the sum of the immediately preceding period's price and the SI value
(the mathematical formulas are provided later in the article). The calculation is performed
automatically, and, as a result, certain values are obtained for each period.
On a chart, ASI is drawn in the form of a line moving up and down above and below the zero line. When the oscillator's line goes
up, an uptrend prevails. Conversely, when the oscillator's line goes down, a downtrend prevails.
The farther away from the zero line the ASI line is, the stronger the price momentum is. Extreme
values warn of oversold and overbought conditions of an instrument and possible trend reversals.
The line's moving close to the zero line for a noticeable period of time suggests a sideways market
presence.
Note that the ASI oscillator is always drawn in an additional area below the market price chart.
On the following picture, you can see an example of the ASI oscillator.
It is good to use the oscillator in conjunction with the market price chart and other trend-following
indicators that can confirm or deny its trading signals.
Please remember that the ASI oscillator uses the historical data for its calculation, and all the information it provides belongs to the past. ASI does not predict trend's direction or reversal points. A trader can only suppose that the past tendencies will continue to develop in the same way for some time in the future and try to use this supposition appropriately.
To apply an ASI oscillator to a chart, a trader needs to follow the procedure common to all Marketscope indicators. For more information, see the Add Indicator article.
During the procedure, a trader can customize an oscillator by specifying its parameters in the Properties dialog box. For more information, see the Change Indicator Properties article. The parameters fall into two groups:
The ASI oscillator has only one Calculation parameter - T. The parameter allows specifying the number of periods, over which the MVA indicator's values (used in the calculation of the ASI values) are to be calculated. The possible values are from 2 through 1,000. The default value is 300. The smaller the number is, the more sensitive the oscillator becomes. Its line looks choppy and changes its direction more often. The greater the number is, the less sensitive the oscillator becomes. Its line is smoother and has smaller amplitude. Traders choose the T parameter's value in accordance with their need of the level of sensitivity of the oscillator. The most commonly used value is the default one - 300.
On the following picture, you can see how oscillators of different Number of periods values look
like on a chart.
The parameter is available on the Parameters tab of the ASI Properties dialog box under
the Calculation heading.
When an ASI oscillator is drawn on a chart, a trader can analyze its information and try to interpret it correctly. The Buy and Sell signals are provided by the direction of the oscillator's line. When the line is going upwards, consider opening of Buy positions. On the contrary, when the line is going downwards, consider opening of Sell positions. The line's extreme values near the upper and lower boarders of the chart signal possible trend reversals and the need to consider appropriate actions regarding opening and closing of trading positions. It is advisable to confirm or deny the ASI information with other indicators' trading signals.
On the following picture, you can see examples of the ASI trading signals.
The ASI oscillator's values are calculated automatically using the following formula:
ASI = ASIi-1 + SI
where:
ASI - is the Accumulation Swing Index value of the period being calculated.
ASIi-1 - is the Accumulation Swing Index value of the period immediately presiding the one being
calculated.
SI - is the Swing Index value of the current period.
SI = 50 x nom x K / (T x R)
R = TR - 0.5 x ER + 0.25 x SHi
K = max of hc and lc
SHi = Abs (Closei-1 - Openi-1)
ER = hc if Closei-1 > Highi
ER = lc if Closei-1 < Lowi, else ER = 0
TR = max of hc, lc, hl
hc = Abs (Hihgi - Closei-1)
lc = Abs (Lowi - Closei-1)
hl = Hihgi - Lowi
nom = Closei - Closei-1 + 0.5 x (Closei - Openi) + 0.25 x (Closei - Openi-1)