Throughout the extensive history of the financial markets, a plethora of tools has emerged, providing traders with the means to assess asset conditions and profit from price fluctuations. Clearly, financiers cannot employ all these tools simultaneously. As a result, certain indicators tend to linger in the background, overshadowed by their more widely known counterparts like RSI, MA, Stochastic, and others. The Accumulative Swing Index (ASI) is one such tool that often remains in the shadows. However, its utility, especially in the binary options market, should not be overlooked. Therefore, it is worthwhile to acquaint oneself with the capabilities of ASI.
Learn More about Accumulative Swing Index (ASI)
Technical indicators play a crucial role in predicting future price movements, and one such indicator is the Accumulative Swing Index (ASI), which falls under the category of oscillators. Similar to most technical indicators, ASI aids in forecasting future price directions by presenting the cumulative value of the swing index over a specific period.
J. Wells Wilder, Jr., the mind behind ASI, had a diverse background as a mechanical engineer and real estate developer before entering the realm of professional stock trading. Notably, ASI is just one among several indicators he developed, including RSI, ATR, Parabolic SAR, and the moving average.
When computing the Accumulative Swing Index, the focus is on the difference between opening and closing prices. Specifically, it compares the prior closing price with the preceding opening price, and the current closing price with both the previous closing and opening prices. Additionally, it considers the highest and lowest intraday prices relative to the prior closing price.
Fortunately, traders are spared from performing these complex calculations manually, as setting up the ASI indicator on the trading platform suffices. Visually, ASI appears similar to other oscillators, with a dedicated window displaying the signal line oscillating above and below the zero level.
The creator of the tool has emphasized its applicability for analyzing long-term market movements, yet its true effectiveness shines when applied to intraday trading and short-term fluctuations. In this context, the strategy hinges on exploiting minor price changes within the day, enabling traders to execute multiple trades within a single trading session.
How to trade with ASI?
As the indicator operates by comparing various price values over a specific period, its responsiveness to price changes is immediate, offering insights into the prevailing trend. When the Expert Advisor’s signal line is positioned above the 0 mark and trending upward, it signifies a robust upward trend, making it advisable to consider purchasing the CALL contract.
Conversely, when the moving average is situated below the zero level and shows a downward trajectory, it suggests considering the acquisition of a PUT option.
A prolonged presence of the Accumulative Swing Index line near the 0 mark signifies a flat market condition, and under such circumstances, it is advisable to exercise caution and refrain from trading. Furthermore, akin to most oscillators, ASI has the capability to clearly indicate divergence.
It’s essential to acknowledge that the Accumulative Swing Index is not a cure-all solution in electronic contract trading, as it is susceptible to market noise. Nevertheless, it serves as an excellent confirmation tool for candlestick analysis patterns and can be a valuable supplementary signal within an existing trading strategy.
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
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