What is Accumulation/Distribution Indicator? - Definition of Accumulation/Distribution Indicator
Accumulation/Distribution indicator - Accumulation/Distribution indicators is a popular technical indicator that can be found on the - Indicators List on this website. Accumulation/Distribution indicator is used by traders to forecast price movement based on the chart price analysis done using this Accumulation/Distribution indicator. Traders can use the Accumulation/Distribution buy and Sell Signals explained below to determine when to open a buy or sell trade when using this Accumulation/Distribution indicator. By using Accumulation/Distribution and other indicators combinations traders can learn how to make decisions about market entry & market exit.
What's Accumulation/Distribution Indicator? Accumulation/Distribution Indicator
How Do You Combine Indicators with Accumulation/Distribution? - Adding Accumulation/Distribution Indicator in MT4
Which Indicator is the Best to Combine with Accumulation/Distribution?
Which is the best Accumulation/Distribution indicator combination for trading?
Most popular indicators combined with Accumulation/Distribution are:
- RSI
- Moving Averages Indicator
- MACD
- Bollinger Band Indicator
- Stochastic Indicator
- Ichimoku Kinko Hyo Indicator
- Parabolic SAR
Which is the best Accumulation/Distribution indicator combination for trading? - Accumulation/Distribution MT4 indicators
What Indicators to Combine with Accumulation/Distribution?
Get additional indicators in addition to Accumulation/Distribution indicator which will determine the trend of the market as well as others that confirm the market trend. By combining indicators that determine trend and others that confirm the trend & combining these indicators with Accumulation/Distribution indicator a trader will come up with a Accumulation/Distribution based system that they can test using a demo practice trading account on the MT4 software.
This Accumulation/Distribution based system will also help traders to determine when there is a market reversal based on the indicators signals generated and therefore trades can know when to exit the market if they have open trade transactions.
What is Accumulation/Distribution Indicator Based Trading? Indicator based system to interpret price & provide trading signals.
What is the Best Accumulation/Distribution Strategy?
How to Select the Best Accumulation/Distribution Strategy
For traders researching on What is the best Accumulation/Distribution strategy - the following learn tutorials will help traders on the steps required to guide them with coming up with the best strategy for market based on the Accumulation/Distribution indicator system.
How to Create Accumulation/Distribution Systems
- What is Accumulation/Distribution Indicator Strategy
- Creating Accumulation/Distribution Strategy Template
- Writing Accumulation/Distribution Strategy Rules
- Generating Accumulation/Distribution Buy and Accumulation/Distribution Sell Signals
- Creating Accumulation/Distribution Indicator System Tips
About Accumulation/Distribution Indicator Explained
Accumulation/Distribution Trading Technical Analysis Signals
Developed by Marc Chaikin
This indicator is used to assess the cumulative flow of money into & out of a Forex currency 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 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).
In 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.
UpTrend
If the price of a forex pair is rising then the Ac Dc should also be rising. This portrays that the price move is being supported by volumes & the move upwards has strength & 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 a divergence between price and indicator and warns of a possible move in opposite direction.
DownFX Trend
If the price of a forex pair is falling then the AD should also be falling. This illustrates that the price move is being supported by volumes and the move downward 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 a divergence between price and AD and warns of a possible move in opposite direction.
Technical Analysis & Generating Signals
Illustrated Below is example of a chart and the analysis explanation
From the chart above we can separate the chart into 3 parts, part A, B and C.
A - Upwards trendline on chart as well as on the Accumulation Distribution
B - Downwards trendline on chart as well as on the Accumulation Distribution
C - Upward trend line on chart as well as on the Ac Dc
As long as the price and the indicator are moving in the same direction then the price move has enough momentum to continue moving in that direction as illustrated above
FX Trend-Line Break
From the above chart we can see that once the trend line on the AD was broken then the price trendline 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 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 Ac Dc is broken. A trend line break on the indicator warns of a possible reversal.
Entry
Once the trendline 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 and the price breaks both their trendlines.
Entry Signal Generated by Trend Reversal
