Accumulation Distribution Bitcoin Analysis and Accumulation/Distribution Signals

Created by Marc Chaikin

This btcusd indicator is used to assess the cumulative flow of money into and out of bitcoin crypto.

Originally used for stock trading, when it comes to stocks "volume" is the number of stocks traded and transacted for a particular stock, this volume is a direct reflection of the money that's coming into and out of a stock.

The basic principle behind AD is that volume(or money flow) is a leading indicator of the bitcoin price. (Volume precedes bitcoin price).

Tick volume is the measure of bitcoin price changes (ticks) received by a broker during a particular period/interval. Tick volume is incorporated by many brokers in their charting platform.

Interpretation

This volume indicator is used to figure out if volume is increasing or decreasing as the bitcoin price on a chart is moving upwards or moving downwards.

UpBTCUSD Trend

If the bitcoin price on a chart is rising then the Accumulation/Distribution should also be rising. This portrays that the bitcoin price move is being supported by volumes and the move upwards has strength & is sustainable.

If on the other hand bitcoin price is moving up and the volumes are not, the strength behind this move is reducing and waning: this creates divergence between bitcoin price and indicator & warns of a possible move in the opposite trend direction.

DownBitcoin Trend

If the bitcoin price on a chart is falling then the AD should also be falling. This portrays that the bitcoin price move is being supported by volumes and the move downwards has momentum behind it.

If on the other hand bitcoin price is moving down and the volumes are not, the strength behind this move is reducing and waning: this creates divergence between bitcoin price and AD & warns of a possible move in the opposite market direction.

BTCUSD Analysis and Generating Signals

Illustrated Below is an example of a chart and the trading analysis explanation

Accumulation/Distribution Bitcoin Indicator

From chart above we can separate the trading chart into three parts, part A, B & C.

A - Upwards bitcoin trend line on the chart and also on the AD

B - Downwards bitcoin trend line on the chart & also on the AD

C - Upwards bitcoin trend line on the chart and also on the AD

As long as the bitcoin price & the indicator are moving in the same direction then the bitcoin price move has enough energy to continue heading in that direction like shown above

BTCUSD Trend-Line Break

From the above chart we can see that once the bitcoin trendline on the AD was broken then the bitcoin price trend line was also broken.

Looking at the chart below we have added vertical lines to represent the points where the bitcoin trend lines were broken, both on the bitcoin price chart and the indicator.

Comparing the bitcoin trendlines on the indicator and the bitcoin price those of the AD were broken before those of the chart. This is because volume always precedes bitcoin price.

Crypto Trendline Break - Analysis of Accumulation/Distribution indicator

Trading Signals

Exit

Exit signals are derived & generated when the bitcoin trendline on the Accumulation/Distribution is broken. A bitcoin trendline break on the technical indicator warns of a potential reversal.

Exit Signal - Accumulation Distribution Indicator

Entry

Once the bitcoin trendline on the AD indicator is broken it signals of a potential reversal in market direction of the price.

However if we want to take a trade in the opposite trend direction it's always best to chill and wait for a confirmation signal.

A confirmation signal is considered complete once both the indicator and the bitcoin price breaks both their bitcoin trendlines.

Entry Signal - Generated by Bitcoin Trend Reversal - Accumulation Distribution Technical BTCUSD Indicator

Entry Signal Generated by Bitcoin Trend Reversal

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