Accumulation/Distribution MT4 Indicator Signals

Developed by Marc Chaikin

This MetaTrader 4 Indicator is used to assess the cumulative flow of money into and out of a Forex currency pair.

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 MT4 Indicator of the price. (Volume precedes price).

When it comes to the forex market-Forex, there is no central exchange for trades as compared to stock trades where there is a central exchange for stocks, for example the NYSE- New York stock exchange.

Since there is no true measure of volume (actual money) that is flowing into and out of a currency market, Forex brokers have come up with a substitute for the actual money volume, this substitute is known as "tick volume".

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

Interpretation

This volume MT4 Indicator is used to determine if volume is increasing or decreasing as the price of a currency pair is rising or falling.

UpFX Trading Trend

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

If on the other hand price is moving up and the volumes are not, the strength behind the move is reducing; this creates divergence between price and MT4 Indicator and warns of a possible move in opposite direction.

DownFX Trading Trend

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

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

MT4 Indicator and How to Generate Signals

Shown Below is example of a chart and the MT4 Indicator explanation

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

A - Upwards trend-line on chart as well as on the Accumulation/Distribution

B - Downwards trend-line on chart as well as on the Accumulation/Distribution

C - Upwards trend-line on chart as well as on the Accumulation/Distribution

As long as the price and the MT4 Indicator are moving in the same direction then the price move has enough momentum to continue moving in that direction as shown above

Forex 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 and the MT4 Indicator.

Comparing the trend lines in MT4 Indicator and the price those of the AD were broken before those of the chart. This is because volume always precedes price.

FX Signals

Exit

Exit trading signals are generated when the trend line on the Accumulation/Distribution is broken. A trend-line break on the MT4 Indicator warns of a possible reversal.

Entry

Once the trend line on the AD is broken it warns of a possible reversal in 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 MT4 Indicator and the price breaks both their trend lines.

Entry Signal Generated by Trend Reversal