The indicator of accumulation/distribution (in short - AD) is a tool of technical analysis, which is related to the class of oscillators and the group of volume indicators. It is developed by another volume tool, On Balance Volume, and on the algorithm of the accumulation and distribution index. Below, we describe the algorithm for the operation with this instrument, as well as the rules of trading with it.
In order to understand the essence of this robot, it is necessary to understand, what its name means:
- The accumulation is a situation in the market, which is controlled by the buyers;
- The distribution is a situation in the market, which is controlled by the sellers.
This tool of technical analysis can be called the standard one, because it is one of the instruments you can find on the trading platforms MetaTrader4 and MetaTrader5. Thanks to this robot, it is possible to compare changes in the price of a financial instrument and the volume of trades in the market and it is possible due to the mathematical formula, that underlies this robot. In the heart of this formula doesn’t lay the volume in money equivalent, but the tick volume, which displays the number of transactions for a certain period of time. Trading with this tool is easy and you can verify this yourself by checking it for a start on the demo account and if you are satisfied with your results, you can start trading on the real one, getting a stable profit.
Trading with the Accumulation/Distribution indicator
Starting to trade in the world exchange market, it is important not only to choose the financial instrument, but also to find the suitable indicator. In order to download the AD robot of the new version for free, you need to find it on the MTDownloads website. After downloading and installing, you can use this robot, which will be displayed in a separate window under the price chart of the trading platform. You don’t need to configure any robot settings for a long time, as there are not so many of them and they are quite understandable, even for a non-professional trader.
Since this is an indicator of volume, the volume of transactions affects its indexes and it is displayed on the graph, as the ordinary curved line.
Each trader determines for himself, how to use this tool of technical analysis:
- You can record the cash flows;
- It helps to determine the divergence in the market, as well as its type (bullish or bearish). Any divergence gives the information about the price reversals of a financial instrument;
- Using it, you can confirm the trend and even know its type:
○ If the indexes of the AD tool are growing, than the trend is bullish (upward);
○ If the indexes of the AD tool are falling, than the trend is bearish (downward);
- To determine the discrepancies in the market.
This tool is very convenient to use for trading, as its signals often coincide with the price schedule and that's why even the beginners in the world of trading can use this robot, as it is an ideal assistant, especially for those, who don’t have too much experience in the field of investments.
Also there are universal tips for the new traders, about how to use such tool of technical analysis:
- If the indexes grow - you need to buy an asset;
- If the indexes fall - you need to sell the asset.
With the help of these tips, trading will be safe and profit will be bigger, but you shouldn’t forget, that in addition to these recommendations, you need to consider many more factors, which affect the movements in the market.
The disadvantages of using the AD indicator
Despite the fact, that the AD gives a lot of signals, which help to see the full situation in the market, it has some disadvantages:
- It works without taking into account gaps. That’s why, you can suffer of a significant loss of funds, if you don’t follow the price schedule, while using this indicator. It can also be avoided by following the fundamental analysis and so before the important world news, you will be on the alert and will definitely get profit.
- The redrawing is possible. This situation is observed with almost every robot and is a routine but, you must take this into account and make only deliberate decisions.
- There are delays, due to the use of the tick volume, which distorts the real situation in the market.
These disadvantages are extremely small, in comparison to the advantages of this robot and they are easily got round, by not using this tool as an independent strategy, but in combination with other indicators. Download any version of the indicator of Accumulation/Distribution right now on the MTDownloads website for free and you will feel all the advantages on practice.