Accumulation/Distribution CFD Technical Analysis and Accumulation/Distribution CFD Signals

Developed by Marc Chaikin

This cfds technical indicator is used to assess the cumulative flow of money into and out of a cfd.

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

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

Tick volume is the measure of cfd price changes (ticks) received by a broker during a particular trading period/interval. The tick volume is incorporated by many cfds trading brokers in their charting software.

Interpretation

This volume indicator is used to determine if volume is increasing or decreasing as the cfd price on a cfd chart is rising or falling.

UpCFD Trading Trend

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

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

DownCFDs Trading Trend

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

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

CFD Technical Analysis & Generating CFD Signals

Below is an example of a cfd chart and the technical analysis explanation

From the chart above we can separate the chart into 3 parts, part A, B and C.

A - Upward cfd trendline on chart as well as on the Accumulation/Distribution

B - Downward cfd trendline on chart as well as on the Accumulation/Distribution

C - Upward cfd trendline on chart as well as on the Accumulation/Distribution

As long as the cfd price and the indicator are moving in the same direction then the cfd price move has enough momentum to continue moving in that direction as shown above

CFD Trend-line Break

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

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

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

Trading Signals

Exit

Exit trading signals are generated when the trend line on the Accumulation/Distribution is broken. A cfd trend-line break on the indicator warns of a possible reversal.

Entry

Once the trend line on the AD is broken it warns of a possible reversal in the direction of the market.

However if we want to take a trade in the opposite direction it is always best to wait for a confirmation signal.

A confirmation signal is considered complete once both the indicator and the cfd price breaks both their cfd trend lines.

Entry Signal Generated by CFD Trend Reversal