Accumulation/Distribution Technical Analysis & Accumulation/Distribution Signals

Developed by Marc Chaikins

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

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 price. (Volume precedes price).

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

Interpretation

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

UpXAUUSD Trend

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

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

DownGold Trend

If the price on a chart is falling then the AD should also be falling. This displays that the price move is being supported by volumes & the move downward has strength behind it.

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

Gold Analysis & How to Generate Trade Signals

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

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

A - Upward trend-line on the chart as well as on the AD

B - Downward trend-line on the chart as well as on the AD

C - Upward trend-line on the chart as well as on the AD

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

Trendline Break

From the above chart we can see that once the trendline on the AD was broken then the 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 price chart & the indicator.

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

Trading Signals

Exit

Exit signals are generated when the trendline on the Accumulation/Distribution is broken. A xauusd trend line break on the technical indicator warns of a possible reversal.

Entry

Once the trendline 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 & the price breaks both their trend lines.

Entry Signal Generated by Trend Reversal