The Acceleration Band Indicator

How to trade

When a breakout occurs outside of the bands, it suggests the start of a strong rally or a sell-off.
When the price closes inside the bands, this signals then end the movement. A position should be entered once there are 2 consecutive closes outside Acceleration Bands. The position is then closed once the candle closes back inside the bands.

Headley suggests using them on longer time frames, weekly and monthly, to spot price acceleration breakouts.

If you are trading on shorter time frames, upper and lower bands can be used as support and resistance. This allows you to trade inside the bands profiting off small price movements.

The acceleration band indicator was developed by Price Headley to help identify runaway trends. It consists of a simple moving average with a band either side with equal widths. The bands are calculated using the below formula.

Upper band = Simple Moving Average (High * (1 + 4 * (High - Low) / (High + Low)))

Lower band = Simple Moving Average (Low * (1 - 4 * (High - Low)/ (High + Low)))

The basic principle is to find the currency pairs that are strongly trending and try to profit from them.