Accumulation/Distribution Bitcoin Trading Analysis & Accumulation/Distribution Trading Signals

Developed by Marc Chaikin

This indicator is used to assess the cumulative flow of money into and out of bitcoin crypto.

Originally used for stocks trading, when it comes to stocks trading "volume" is the amount of shares traded in a particular stock, this volume is a direct reflection of the money that is coming into and out of a stock.

The basic principle behind AD is that volume(or money flow) is a leading indicator of the bitcoin trading price. (Volume precedes bitcoin trading price).

Tick volume is the measure of bitcoin trading price changes (ticks) received by a crypto broker during a particular trading period/interval. Tick volume is incorporated by many crypto brokers in their charting software.

Interpretation

This volume indicator is used to determine if volume is increasing or decreasing as the bitcoin trading price on a cryptocurrency chart is rising or falling.

UpBTCUSD Trading Trend

If the bitcoin trading price on a cryptocurrency chart is rising then the Accumulation/Distribution should also be rising. This shows that the price move is being supported by volumes and the move upwards has strength & is sustainable.

If on the other hand bitcoin trading price is moving up and the volumes are not, the strength behind the move is reducing; this creates divergence between price and indicator & warns of a possible move in the opposite direction.

DownBitcoin Trading Trend

If the bitcoin trading price on a cryptocurrency chart is falling then the AD should also be falling. This shows that the price move is being supported by volumes and the move downwards has strength behind it.

If on the other hand bitcoin trading price is moving down and the volumes are not, the strength behind the move is reducing; this creates divergence between price and AD & warns of a possible move in the opposite direction.

BTCUSD Analysis & Generating Trading Signals

Shown Below is an example of a cryptocurrency chart and the technical analysis explanation

From chart above we can separate the chart into three parts, part A, B & C.

A - Upwards bitcoin trendline on chart as well as on the Accumulation/Distribution

B - Downwards bitcoin trendline on chart as well as on the Accumulation/Distribution

C - Upwards bitcoin trendline on chart as well as on the Accumulation/Distribution

As long as the bitcoin trading price & the indicator are moving in the same direction then the price move has enough momentum to continue heading in that direction as shown above

BTCUSD Trend-Line Break

From the above chart we can see that once the bitcoin trend line on the AD was broken then the bitcoin trading price bitcoin trend line was also broken.

Looking at the chart below we have added vertical lines to represent the points where the bitcoin trend lines were broken, both on the price chart and the indicator.

Comparing the bitcoin trend lines on the indicator & the bitcoin trading price those of the AD were broken before those of the chart. This is because volume always precedes bitcoin trading price.

Trading Signals

Exit

Exit signals are generated when the bitcoin trend line on the Accumulation/Distribution is broken. A bitcoin trendline break on the technical indicator warns of a possible reversal.

Entry

Once the bitcoin trend line on the AD is broken it warns of a possible reversal in direction of the market.

However if we want to take a trade in the opposite direction it's always best to wait for a confirmation signal.

A confirmation signal is considered complete once both the indicator & the bitcoin trading price breaks both their bitcoin trend lines.

Entry Signal Generated by Bitcoin Trend Reversal