Blockchain and Cryptocurrency Advanced - Detecting and Confirming a Trend Through the A/D Indicator
The accumulation/distribution indicator makes it easy to easily identify trends based on the movement of the oscillating line. It has proven to be a very good indicator in detecting and confirming trend.
For Uptrend
When the market is moving in an uptrend, the A/D oscillator line will also be moving in the same direction. This basically means that there is money flowing into the market as more and more buyers are accumulating. This shows that there is an increased demand for the cryptocurrency asset, which increases the buying pressure and in turn drives the price up.
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BNB/USDT Chart
For Downtrend
When the market is moving in a downtrend, the A/D oscillator line will also be moving in the same direction. This basically means that there is money flowing out of the market as more and more sellers are selling and causing the distribution. This shows that there is a decreased demand for the cryptocurrency asset, which increases the supply and the selling pressure and in turn drives the price down.
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AAVE/USDT Chart
Trend Reversals
The A/D indicator can be used to identify potential trend reversal in the market. This signal happens when there is a divergence between the price movement and the A/D indicator movement. If the price is falling and the A/D oscillator line is rising, it can be an indication that the selling pressure isn’t strong enough to continue pushing the price down, which could see the price reverse upwards.
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This really looks like a possible trend that should be considered and I really love the indicator also as it looks like it actually helps to identify trends. But my major concern is that hope it does not give false signal at times