The indicator determines the imbalance between buyers and sellers.
Appearance of the indicator.
Accumulation & distribution is a classic tool of technical analysis, which shows in which phase the asset is: in the phase of accumulation or distribution.
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The difference of the version from SpreadFighter is that the user can independently select the data source for calculating the indicator.
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A moving average of indicator values has been added for the convenience of perception.
The Accumulation/Distribution (A/D) indicator is a variation of the On-Balance Volume (OBV) indicator. It shows the general mood of large participants of trades in a certain asset on the selected time interval. It is believed that in the Accumulation phase, large players accumulate the asset before the onset of a powerful uptrend, and in the Distribution phase they sell it out.
The A/D indicator chart largely repeats the price chart, but on it you can find patterns of divergence, indicating a probable imminent change of trend, or convergence, confirming the beginning of the trend.
<aside> 💡 The main pattern of divergence is divergence. This is a situation when the extremums of the asset price are updated, but the extremums of A/D are not updated, or change direction.
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Divergence.
The pattern "Convergence" is a situation in which the extremums of both the price and the A/D indicator are updated. This pattern confirms the trend development.
Trend development.
Breakdowns of levels can appear on the A/D indicator chart. In the case when the price of an asset stands in a narrow balance or presses to the top of a triangle, and A/D updates the extrema, there is a high probability of a breakdown of the balance structure with the subsequent removal of the price to a new level.
Breakdown.
The A/D indicator is not without disadvantages, as it too often simply repeats the price chart. But in SpreadFighter implementation its visualization can be changed using different data sources - Volume, CVD, OI. You can also change the type of calculated moving average. For example, an exponential moving average (EMA) calculated by Volume will be more effective on small timeframes. A volume-weighted moving average (VWMA) will be more effective on older timeframes.
The advantage of the variety of visualizations of the A/D indicator in SpreadFighter.
Thus, by combining different types of A/D indicator visualizations, you can achieve the detection of patterns that allow you to correctly assess the current situation in the market and join the actions of major players to make a profit.