Knowledge of current economic events is a fundamental element of effective trading. In the case of currency pairs and indices, the ability to use the calendar is already satisfactory. Nevertheless, to assess market sentiment, it is worth following current events. In the case of instruments such as shares, tracking information from companies is a necessity.
A/D Line (Accumulation/Distribution Line) Indicator
Type of Indicator
The Accumulation/Distribution Line, often abbreviated as A/D Line, is a technical analysis indicator used in financial markets. It is a volume-based indicator that combines price and volume changes to help determine whether a market is in an accumulation (buying) or distribution (selling) phase.
Purpose
The primary purpose of the A/D Line is to identify the overall price trend and potential reversal points by analyzing the relationship between price and volume. This indicator is used to confirm the strength of a trend and to detect possible turning points.
Calculation Method
Calculating the A/D Line involves several steps:
Calculate the Money Flow Multiplier (MFM):
where:
CCÂ is the closing price,
LLÂ is the low price,
HHÂ is the high price.
Calculate the Money Flow Volume (MFV):
Add the MFV to the previous A/D Line value:
Trading Based on the A/D Line Indicator
Trend Confirmation:
If the A/D Line is rising along with prices, it suggests a strong uptrend. This can be interpreted as a signal to buy.
If the A/D Line is falling along with prices, it indicates a strong downtrend. This might be a signal to sell.
Divergences:
Bullish Divergence: If the price reaches new lows…
