Accumulative Swing Index indicator or also known as ASI is used by traders to gauge the long and short term trends of the price of a stock over a specific period of time. The ASI indicator tends to project real market condition, the indicator resembles the true price themselves helping the trader to understand the real market scenario.
Accumulative Swing Index FAQ
The ASI indicator is the sum total or cumulative value of the swing index indicator developed by Welles Wilder. It can be analyzed using line studies, technical indicators, chart patterns as an alternative view to see the price action.
The swing index indicator can be used to generate buy or sell signals. Generally, breach of a previous swing high is considered as a buy signal. Similarly, breach of a previous swing low is considered of a sell signal. Check the image to know how the Swing Index works.
The ASI indicator also helps to identify classic support resistance levels. The indicator also has the inherent characteristics of identifying short term swing points and also shows the real price trends. Nowadays, this indicator is available in trading platforms like Zerodha Kite, Upstox Pro, etc.
How to add the Accumulative Swing Index indicator in Zerodha Kite?
- Go to your MarketWatch.
- Choose the stock or index or commodity you are going to trade.
- Right-click on the stock and open its chart.
- The chart window of the stock or the index or the commodity opens.
- Now go to studies and select studies.
- Go to Accumulative Swing Index and click on it.
- A small window opens with default parameters of the indicator.
- Once we select the desired parameters and click on the Done command, the parameters window goes off the screen and we can see the indicator on the price chart.
Accumulative Swing Index on Upstox
The same indicator is available on other trading platforms like Upstox Pro, Allice Blue and also with few other brokers. To attach the indicator to Upstox also you need to attach the indicator from the indicators section. Check the image below.
How to use the Accumulative Swing Index indicator?
- In India, different brokers have different calculations for the ASI.
- Zerodha plots the indicator in multiple of thousands into the minus and plus. Watch the images.
- At the same time, Upstox plots it both sides of a zero line in a smaller range.
- Few other terminals show it oscillating from +100 to -100.
- ASI can be used to identify support or resistance levels.
- We can plot trend lines on the indicator too.
- We can note the swing high and low of the indicator and check that with a price chart to identify divergence.
ASI indicator in action
- The indicator works in multiple time frames but I suggest to use daily time frame for better result.
- The picture above shows the 1-minute chart of State Bank of India (SBIN) stock price movement with respect to the swing index indicator.
- We can create a short position when the swing indicator reaches a peak and comes down from it.
- The accumulative swing indetal of x indicator (ASI) shows the price trend. Understanding the correct price trend from ASI is important before creating a position.
- We can close the short position when the swing index retraces after creating a bottom.
- A fresh buy position can also be created if the swing index goes up after touching the bottom.
Zero Line is Important
Crossing above or below the zero line is considered to be of utmost importance. We can consider a stock crossing above the zero line as bullish. At the same time, we can consider a stock crossing below the zero line asforms& bearish. When the Accumulative Swing Index indicator in a stock crosses the zero on the upside the stock enters new bull orbit. Similarly, a stock becomes highly bearish if the ASI crosses below zero. A stock can stay in the bullish or bearish phase for a long time. Check the example of Yes Bank share, where a super bearish phase started after the ASI plunged below the zero mark.
Drawing a Trend Line on the ASI Indicator
The image below shows how to draw a trend line on the Accumulative Swing Index indicator. Till the trend line is trending up, the trend is up. Similarly, when the trend line is trending down, the trend will be down. We can also identify the change of the trend when the indicator breaches a long trend line.
The ASI indicator works well in creating bullish or bearish positions. However, the indicator will work best when you use it with a few other indicators.