Accumulation Swing Index (ASI)

Accumulation Swing Index (ASI) gets signals from previous maximums and minimums of price. The indicator is developed by Welles Wilder.

Formula

ASI is calculated by the formula:

<math> \operatorname{ASI_i} = ASI_{i-1} + SI_i </math>

where

<math>\operatorname{SI}</math> is a value of Swing Index calculated by the formula:

<math> SI_{i} = 50 \times \left( \dfrac{Close_{i-1} - Close_i + 0.5 \times (Close_{i-1} - Open_{i-1}) + 0.25 \times (Close_{i} - Open_i) }{R}\right) \times \dfrac{K}{T} </math>

where

<math>\operatorname{K}</math> is the maximum of two values: <math>High_{i-1} - Close_{i}</math> and <math>Low_{i-1} - Close_i</math>

<math>\operatorname{T}</math> is a user defined value which means the maximum price changing during trade session.

<math>\operatorname{R}</math> is a value calculated on the base of the relationship between current close price and previous high and low prices. The formula is:

<math>R = TR - 0.5 \times ER + 0.25 \times SH</math>

where

<math>\operatorname{TR} = max(High_i - Close_{i-1}, Low_i - Close_{i-1}, High_i - Low_i) </math>

<math>\operatorname{ER} = \left\{ \begin{matrix} High_i - Close_{i-1}, & \mathrm{if}\ Close_{i-1} > High_{i} \\ 0, & \mathrm{if}\ Low_{i} \leqslant Close_{i-1} \leqslant High_{i} \\ Low_i - Close_{i-1}, & \mathrm{if}\ Close_{i-1} < Low_{i} \\ \end{matrix} \right. </math>

<math>\operatorname{SH} = Close_{i-1} - Open_{i-1}</math>

Usage

Trend Confirmation

ASI can be used to confirm a price trend:

• Increasing price is usually accompanied by increasing ASI.
• Decreasing price is usually accompanied by decreasing ASI.

Confirmation of Trendline Breakout

Welles Wilder describes why ASI can be used for trend line breakout confirmations in his book "New Concepts in Technical Trading Systems":

When the Index is plotted on the same chart as the daily bar chart, trend lines drawn on the ASI can be compared to trend lines drawn on the bar chart. For those who know how to draw meaningful trend lines, the ASI can be a good tool to confirm trend-line breakouts. Often erroneous breaking of trend lines drawn on bar charts will not be confirmed by the trend lines drawn on the ASI. Since the ASI is heavily weighted in favor of the close price, a quick run up or down during a day's trading does not adversely affect the index.

So, when the trendline is broken out, you can use the ASI indicator to confirm the breakout: