Accumulation/Distribution Analysis & Accumulation/Distribution Trading Signals

Developed by Marc Chaikins

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

Originally used for stocks trading, when it comes to stocks "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 trading price. (Volume precedes xagusd price).

Tick volume is the measure of trading price changes (ticks) received by a broker during a particular trading period/interval. 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 on a chart is rising or falling.

UpTrend

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

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

DownXAGUSD Trend

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

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

Trading Analysis & How to Generate Trade Signals

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

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

A - Upwards trend-line on the chart as well as on the AD

B - Downwards trend-line on the chart as well as on the AD

C - Upwards trend-line on the chart as well as on the AD

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

Trendline Break

From the above chart we can see that once the trend-line on the AD was broken then the trading 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 indicator.

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

Trading Signals

Exit

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

Entry

Once the trend-line on the AD is broken it warns of a possible reversal in the 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 indicator & the trading price breaks both their trend lines.

Entry Signal Generated by Trend Reversal