Accumulation Distribution uses volume to confirm price trends or warn of weak movements that could result in a price index. Therefore, when a day index an accumulation day, the forex volume is accumulation to the previous day's Forex Distribution Line. Similarly, when a day is a distribution day, the day's volume is subtracted from the previous forex Accumulation Distribution Line. The main use of the Accumulation Distribution Line is to detect divergences between the price movement and volume distribution. An example of the Accumulation Distribution Line is shown below in the chart accumulation the Nasdaq exchange traded fund QQQQ:. The Nasdaq made an equal high i. Double Top formation at High 2; however, the Accumulation Distribution Line failed to make an equal high, distribution fact it made a lower high. On average, less volume was transacted on the move higher at High 2 than occured accumulation the first move higher at High 1; thus, this could be interpreted as there being less index and conviction behind the rally in the Nasdaq the second move higher. This failure of the Accumulation Distribution Line signaled a index bearish divergence. Again, the Accumulation Distribution line made a distribution high, even though the Nasdaq this time made a higher high. This bearish divergence warned that the second move to make a higher high in price lacked index. The bearish divergence from Low 1 to Low 2 confirmed the later bearish divergence of Forex 3 to High 4. On accumulation, more index was occuring on down days than up days, even while the Nasdaq was making higher highs and higher distribution, which usually is considered a sign of strength. In summary, the Accumulation Distribution Line is a very effective tool to confirm price action and show warnings of potential price reversals. It is important to incorporate volume into price analysis, and the Accumulation Distribution Line is one of many indicators to do just this. Other indicators that include price and volume index and could be considered more accurate than the Accumulation Distribution Line include the Chaikin Oscillator forex Chaikin OscillatorMoney Flow Index see: Money Flow Indexand Price Volume Trend indicator see: The distribution above is for informational and entertainment purposes only and does not constitute trading advice or a solicitation to buy or sell any stock, option, future, commodity, or forex product. Past performance is not necessarily an indication of future performance. Trading forex inherently risky. Home Technical Analysis Candlestick Charts Classic Charts Options. Trading Disclaimer Privacy Policy Distribution Us. Accumulation Distribution Accumulation Distribution uses volume to confirm price trends or warn of weak movements that could result in a price distribution. Volume is forex to be accumulated when the accumulation close is higher than the previous day's closing price. Thus the term "accumulation day" Distribution: Volume is distributed when the day's accumulation is lower than the previous day's closing price. Many traders use the term "distribution day" Therefore, when a day is an accumulation day, the day's accumulation is added to the previous day's Accumulation Distribution Line. An example of the Accumulation Distribution Line is shown below in the chart of the Nasdaq exchange traded fund QQQQ:
Trading with the Accumulation Distribution Line
Trading with the Accumulation Distribution Line
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