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phone: +420 222 767 102
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print Accumulation/Distribution This indicator shows the level of a trader's interest in a certain asset
Rule of thumb
A typical example of divergences between prices and the Accumulation/Distribution indicator, is a situation where:
- the market is rising, reaching a new maximum level in a given period, and
- at the same time the indicator fails to confirm the move is below its maximum levels in the same time-frame
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The Accumulation/Distribution indicator, developed by Marc Chaikin, is based on the idea that significant market movements are usually accompanied by higher market turnover.
As follows, the indicator attributes more importance (weight) to prices that occur during periods of higher volume. At the same time, movements that take place when the turnover is low are considered to be less important.
The interpretation of the Accumulation/Distribution line rise is that the buying side has the initiative on the market, as most of the turnover takes places when the prices reach new levels. A rise of the indicator line displays upward price pressure, which is dependent on increased demand. On the other hand, a decline of the Accumulation/Distribution indicator reflects the situation when a supply side has the initiative on the market and indicates selling pressure from the market.
The Accumulation/Distribution indicator can be used for confirmation of market movements. When the indicator behaves in the same way as the prices, market movement is confirmed. Divergences between price action and the indicator undermine the significance of the market move in question, and hint at possible trend reversal.
How to use it with MetaTrader 5:
- Select a chart for which you want the Distribution/Accumulation indicator to be calculated.
- Go to: Insert - Indicators - Volumes – Distribution/Accumulation.
- For the “volumes” parameter in the pop-up box, select “tick” instead of “real”.
- Accumulation/Distribution will be automatically calculated by MetaTrader 5.