Accumulation Distribution Indicator
Firstly, indicators of technical analysis, including the Accumulation Distribution indicator, which will be discussed now, are the basis of technical analysis. There are so many of them that in order to determine which ones to apply in a particular situation, you need to spend a lot of time directly on the analysis. Very often you will notice that some indicators work better on certain trading instruments and timeframes.
At the same time, most indicators are late in their signals. Traders often say this is bad. But! What difference do they delay or not, if their signals are repeated, that is, they are systemic? They are great for analyzing the market situation, which, in turn, allows you to profit when trading.
So, the Accumulation Distribution indicator.
The indicator considers the chart as the ratio of volume to price over a certain period of time. Volume is a kind of coefficient of change. It sounds complicated, but in fact, everything is simple, an increase in volumes makes a big contribution to changing the quotes of a trading instrument. The indicator line clearly shows when volumes are growing and when they are falling.
The growth of the Accumulation Distribution Indicator, A / D “speaks” of the accumulation of BUY positions (that is, of purchases) in a trading instrument, and the decline – of sales.
Adding an indicator to MT
Accumulation / Distribution (Accumulation Distribution Indicator, A / D) is included in the standard equipment of MT4 and MT5 trading platforms. To add it to the chart of the trading instrument, open the “Insert / Indicators /” menu
Option to add Accumulation / Distribution Indicator (A / D) No. 2.
By default, the Navigator window is open on the desktop. Select the Accumulation / Distribution, A / D indicator in it, as shown in the figure, and drag it onto the chart of the trading instrument.
Calculation of the Accumulation / Distribution (A / D) Indicator
Let’s talk about the Accumulation / Distribution (A / D) formula. To calculate the next indicator value (the next point on the chart), the current AD value is taken and the trading volume of our working timeframe is added (subtracted). At the same time, the amount of the term (subtracted) depends on how close the current value of the candle is to the maximum for the indicator period. The closer the candlestick to the extreme, the greater the indicator will show. The indicator value will remain unchanged if the current candlestick closes exactly in the middle between the minimum and maximum for the indicator period.
Formula Indicator Accumulation / Distribution (Accumulation / Distribution, A / D):
A / D (i) = ((CLOSE (i) – LOW (i)) – (HIGH (i) – CLOSE (i)) * VOLUME (i) / (HIGH (i) – LOW (i)) + A / D (i-1),
- A / D (i) – A / D reading for the candle;
- CLOSE (i) – price at which the candle closed;
- LOW (i) – min;
- HIGH (i) – max;
- VOLUME (i) – volume;
- A / D (i-1) – mark for the previous candle.
Discrepancies in the behavior of the Accumulation / Distribution (A / D) Indicator and the trading instrument chart hint at upcoming changes. That is, when the indicator rises and the chart falls, or vice versa, a market reversal is planned. The Accumulation / Distribution, A / D indicator is great for detecting divergence.
Also, if you are used to trading in graphical analysis, then the indicator chart can be analyzed in the same ways.
For example, the passage of the indicator value below the levels or lines of support or resistance indicates that the price will soon go there. Standard graphic shapes – “Head and shoulders”, “Double top or Bottom” work the same way. Etc.
Simple trading tactics
Add the MA indicator to the chart for trend recognition. We will open deals for sale when the price of the chart is below the MA, for the opposite.
Terms of opening a deal for sale:
- Prices below MA.
- The graph of the Accumulation / Distribution (A / D) indicator showed growth over time.
- Prices approached the MA border below.
- The indicator chart has turned down.
We open a deal for sale. Stop Loss set a few points above the value of MA. We wait.
When the price closes above the MA value, we close the deal on the next candle.
For purchase transactions, the reverse is true.
A few simple rules in conclusion
Remember, there are no indicators on Forex that are not mistaken. The Accumulation / Distribution (A / D) indicator, like any others, requires confirmation of its signals. When building your own trading system, use several indicators.
Follow Mani Management. Never in one transaction risk more than 2 percent of your capital. This approach will protect you from ruin and allow you to consistently make money on Forex using the Accumulation / Distribution, A / D indicator.
Follow your trading strategy clearly. If, according to the strategy of the Accumulation / Distribution, A / D Indicator, you need to open a deal, open it, if you fix the result, fix it, and it does not matter if you are in the black. Only following the rules of the Accumulation / Distribution, A / D indicator “from and to” will allow you to earn money.
Accumulation / Distribution, A / D indicator for MT4 can be downloaded here
The Accumulation / Distribution, A / D indicator for MT5 can be downloaded here
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