Accumulation/Distribution CFD Technical Analysis & Accumulation/Distribution CFD Signals

Developed by Marc Chaikin

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

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 cfds price. (Volume precedes cfd price).

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

Interpretation

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

UpCFD Trading Trend

If the cfds price on a cfd chart is rising then the Accumulation/Distribution should also be rising. This shows that the cfds price move is being supported by volumes and the move upwards has strength and is sustainable.

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

DownCFDs Trading Trend

If the cfds price on a cfd chart is falling then the AD should also be falling. This shows that the cfds price move is being supported by volumes and the move downwards has strength behind it.

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

CFDs Technical Analysis & How to Generate CFDs Signals

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

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

A - Upwards cfd trendline on chart as well as on the Accumulation/Distribution

B - Downwards cfd trendline on chart as well as on the Accumulation/Distribution

C - Upwards cfd trendline on chart as well as on the Accumulation/Distribution

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

CFDs Trend Line Break

From the above chart we can see that once the cfd trend line on the AD was broken then the cfds price cfd trend line was also broken.

Looking at the chart below we have added vertical lines to represent the points where the cfd trend lines were broken, both on the cfds price chart and the indicator.

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

Trading Signals

Exit

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

Entry

Once the cfd 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 cfds price breaks both their cfd trend lines.

Entry Signal Generated by CFD Trend Reversal