Accumulation/Distribution Expert Advisor Setup - Setting Up Accumulation/Distribution Expert Advisor
Accumulation/Distribution Expert Advisor Setup - Setting Up Accumulation/Distribution Expert Advisor - A trader can come up with an Accumulation/Distribution Expert Advisor based on the awesome indicator explained below.
Accumulation/Distribution Expert Advisor rules can be combined with other indicators to come up with other EA Robots that trade using rules based on two or more indicators combined to form a system.
Accumulation/Distribution Trading Analysis Signals
Developed by Marc Chaikin
This indicator is used to assess the cumulative flow of money into and out of a FX forex pair.
Originally used for stock trading, when it comes to stock 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 & 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).
When it comes to the market-Forex, there no central exchange for trades as compared to stock trades where there a central exchange for stocks, for example the NYSE- New York stock exchange.
Since there no true measure of volume (actual money) that is flowing into and out of a currency market, brokers have come up with a substitute for the actual money volume, this substitute is referred to as "tick volume".
Tick volume is the measure of price changes (ticks) received by a online broker during a particular period/interval. The 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 of a currency pair is rising or falling.
UpForex Trend
If the price of a forex pair is rising then the Ac Dc should also be rising. This displays 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 & the volumes are not, the strength behind the move is waning: this develops divergence between price and indicator and warns of a possible move in opposite direction.
DownTrend
If the price of a forex pair is falling then the AD should also be falling. This displays that the price move is being supported by volumes & the move downwards has strength behind it.
If on the other hand price is moving down & the volumes are not, the strength behind the move is waning: this develops divergence between price and AD and warns of a possible move in opposite direction.
Forex Technical Analysis and How to Generate Signals
Illustrated Below is example of a chart and the analysis explanation
Accumulation Distribution EA Setup
From the chart above we can separate the chart into 3 parts, part A, B & C.
A - Upward trend line on chart as well as on the Ac Dc
B - Downwards trendline on chart as well as on the Accumulation Distribution
C - Upward trend line on chart as well as on the Accumulation Distribution
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 shown above
Forex Trend Line 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 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.
Accumulation Distribution EA Setup
Signals
Exit
Exit trading signals are generated when the trend line on the Accumulation/Distribution is broken. A trend line break on the indicator warns of a possible reversal.
Ac Dc Expert Advisor Setup
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 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 - Accumulation/Distribution Expert Advisor Setup
