Accumulation/Distribution Gold Trading Analysis and Accumulation/Distribution Gold Trading Signals
Developed by Marc Chaikin
This indicator is used to assess the cumulative flow of money into and out of gold.
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 gold price. (Volume precedes gold price).
Tick volume is the measure of xauusd price changes (ticks) received by a gold broker during a particular trading period/interval. The tick volume is incorporated by many gold brokers in their charting software.
This volume indicator is used to determine if volume is increasing or decreasing as the xauusd price on a gold chart is rising or falling.
If the xauusd price on a gold chart is rising then the Accumulation/Distribution should also be rising. This shows that the xauusd price move is being supported by volumes and the move upwards has strength and is sustainable.
If on the other hand xauusd price is moving up and the volumes are not, the strength behind the move is reducing; this creates divergence between xauusd price and indicator and warns of a possible move in the opposite direction.
If the xauusd price on a gold chart is falling then the AD should also be falling. This shows that the xauusd price move is being supported by volumes and the move downwards has strength behind it.
If on the other hand xauusd price is moving down and the volumes are not, the strength behind the move is reducing; this creates divergence between xauusd price and AD and warns of a possible move in the opposite direction.
XAUUSD Trading Analysis and Generating XAUUSD Trading Signals
Below is an example of a gold chart and the technical analysis explanation
From the chart above we can separate the chart into three parts, part A, B and C.
A - Upward gold trend line on chart as well as on the Accumulation/Distribution
B - Downward gold trend line on chart as well as on the Accumulation/Distribution
C - Upward gold trend line on chart as well as on the Accumulation/Distribution
As long as the xauusd price and the indicator are moving in the same direction then the xauusd price move has enough momentum to continue moving in that direction as shown above
XAUUSD Trend Line Break
From the above chart we can see that once the gold trend line on the AD was broken then the xauusd price gold trend line was also broken.
Looking at the chart below we have added vertical lines to represent the points where the gold trend lines were broken, both on the xauusd price chart and the indicator.
Comparing the gold trend lines on the indicator and the xauusd price those of the AD were broken before those of the chart. This is because volume always precedes gold price.
Exit signals are generated when the gold trend line on the Accumulation/Distribution is broken. A gold trend line break on the indicator warns of a possible reversal.
Once the gold trend line on the AD is broken it warns of a possible reversal in the direction of the xauusd 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 xauusd price breaks both their gold trend lines.
Entry Signal Generated by Gold Trend Reversal