Accumulation Distribution Technical Analysis & Accumulation/Distribution Signals

Created by Marc Chaikins

This indicator is used to assess the cumulative flow of money into & 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's coming into & out of a stock.

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

Tick volume is the measure of price changes (ticks) received by a online 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 momentum behind the move is waning: this develops 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 momentum behind the move is waning: this develops divergence between trading price & AD & warns of a possible move in opposite direction.

XAUUSD 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

Trend-Line Break

From the above chart we can see that once the trend line 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 trend lines on the indicator & the price those of the AD were broken before those of the chart. This is because volume always precedes price.

Signals

Exit

Exit signals are generated when the trend-line 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's 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