Trade Gold Trading

Accumulation/Distribution CFD Analysis and Accumulation/Distribution Signals

Developed by Marc Chaikin

This 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 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 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 chart is rising or falling.

UpTrend

If the cfds price on a chart is rising then the Accumulation/Distribution should also be rising. This highlights that the cfds 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 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.

DownTrend

If the cfds price on a chart is falling then the AD should also be falling. This highlights that the cfds price move is being supported by volumes and the move downwards 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 divergence between cfds price and AD and warns of a possible move in the opposite direction.

CFDs Analysis and How to Generate CFDs Signals

Below is example of a chart and the analysis explanation

Accumulation Distribution Technical Indicator

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

A - Upwards trend-line on chart as well as on the Accumulation/Distribution

B - Downwards trend-line on chart as well as on the Accumulation/Distribution

C - Upwards trend-line 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

Broker

Trend-Line Break

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

Comparing the 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.

Trend-Line Break - Analysis of Accumulation Distribution CFD Trading indicator

Trading Signals

Exit

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

Exit Signal - Generated by Trendline Break

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 cfds price breaks both their trend lines.

Entry Signal - Generated by Trend Reversal

Entry Signal Generated by Trend Reversal