ASI was developed by Wales Wilder as a simple oscillation indicator whose signals were obtained from previous highs or lows of the price. He owns these words: “Somewhere in the labyrinth of opening and closing prices, highs and lows lies a ghost line – a real market.” The cumulative index of oscillations and helps to identify this ghost line.
In his book “New Concepts in Technical Trading Systems,” Wilder defines this indicator as follows: “When ASI is located on the same daily chart, the trends drawn on the indicator can be compared to the same lines of the chart. For those who know how to draw meaningful trend lines, ASI can be a good tool that confirms trend line breaks. Erroneous breaks in the trend lines on the chart will not be confirmed by the corresponding lines on the chart of the indicator. Since ASI uses closing prices to a greater extent, jumping up or down during the day does not have a big negative impact on the index of the indicator. “
Since the indicator aims to display the “real market”, its graph is very similar to the price chart. This similarity also allows the use of classic support / resistance lines when analyzing the index itself. Standard analysis consists in identifying breakouts, new highs and lows, and discrepancies.
Wilder notes the following characteristics of ASI:
It gives quantitative parameters of price fluctuations;
It gives the turning points of short-term fluctuations;
It allows you to see the real power and direction of the market.
Calculation of Accumulation Swing Index
SI (i) = 50 * (CLOSE (i-1) -CLOSE (i) + 0.5 * (CLOSE (i-1) -OPEN (i-1)) + 0.25 * (CLOSE (i) – OPEN (i)) / R) * (K / T) ASI (i) = ASI (i-1) + SI (i)
SI (i) – current value of technical indicator Swing Index;
SI (i – 1) – the value of the technical indicator Swing Index on the previous bar;
CLOSE (i) – current closing price;
CLOSE (i – 1) – the previous closing price;
OPEN (i) – current opening price;
OPEN (i – 1) – previous opening price;
R is a parameter calculated by a complex formula on the basis of the ratio between today’s closing price and yesterday’s high and low;
K is the largest of the two values: (HIGH (i – 1) – CLOSE (i)) and (LOW (i – 1) – CLOSE (i));
T – the maximum permissible price change during the trading session;
ASI (i) – current value of the indicator Accumulation Swing Index.