This is a volume indicator which attempts to measure supply and demand for a currency pair by determining whether investors are generally accumulating or distributing the pair.

Example 2 Final Divergence - Accumulation Distribution | Forex Indicator | CMS Forex

It is a variety of the more commonly used On Balance Volume. It is based on the assumption that volume may be a leading indicator to price action. Here is how the formula looks like:.

Accumulation Distribution Line - Advanced Forex Strategies

The larger the spread between the opening and the close price relative to the daily range high to low , the greater the change in the indicator.

However, only a portion of the daily volume is attributed to the winning party.

For example, if the market is on the rise, people tend to eye the new highs, often disregarding the underlying developments. The same logic applies to the reverse scenario. The significance of the open and close lies in the information these two price levels contain.

The open reflects everything that has happened since the previous close while the market was inactive — news, shifts in sentiment etc. As for Forex, due to its decentralization the market operates around the clock, but it closes during the weekend.

This makes the open on late Sunday particularly important because a lot of events might have occurred during those two days. Closing prices reflect the events and sentiment which have shaped the trading day and are especially important for the daily settlement of trading accounts.

Trading from the open is often dominated by amateurs, while professionals traders are active through the whole day and especially into the close. Conversely, if the market is marking a lower low, while the indicator reaches a higher low, the bullish divergence generates a buy signal as professional traders are buying into the dip.

Trend-Spotting With The Accumulation/Distribution Line

Check out the following example. Founded in , Binary Tribune aims at providing its readers accurate and actual financial news coverage.

Our website is focused on major segments in financial markets — stocks, currencies and commodities, and interactive in-depth explanation of key economic events and indicators. Trading forex, stocks and commodities on margin carries a high level of risk and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite.

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