Understanding Accumulation / Distribution (A/D) Indicator
Hello everyone, hope you all are doing good? This is the beginning of an exciting series, which promises to be informative and also educative, do well to follow all the parts, as you will definitely gain 1 or 2 useful information from the series. In today's article, we would be learning about Accumulation / Distribution (A/D) Indicator and how to set up the A/D indicator on the trading chart.
From my very understanding, A/D indicator is a real-time indicator that plays a vital role in helping traders make good trading decisions. This indicator helps traders to know accumulation and distribution period of an asset, which will help traders to be able to detect trend direction and predict trend reversals.
Accumulation period is that period when the value of the asset is very low, and traders are buying more and more of the assets as they believe the asset value is below it's fair value, and this will result to the increase in the price of the asset.
Distribution period is that period when the value of the asset is very high, and traders are selling their assets in order to take point as they believe a market reversal trend is very close, and this will result to the decrease in the price of the asset.
As you can notice, the A/D indicator can help traders identify the trend of the market and predict market reversals. Because after accumulation period(bearish market), comes a bullish market and after a distribution period(bullish market), comes a bearish market.
The reason for these trend reversals, is because when traders are accumulating asset, they normally don't sell their assets cheap, hence, that will boost the price of the asset, hence, bullish trend afterwards. Same with distribution period, as traders are selling more of the token, the value of the token will begin to fall, which will lead to panic selling, and the value the token will start decreasing, hence, bearish trend.
A/D indicator relates to volume, because it is a real-time indicator and also, the higher the volume during accumulation and distribution, the strength of the market trend, be it bullish or bearish.
How To Set Up The A/D Indicator On The Trading Chart
I will be making use of the Huobi Exchange to show how to add the A/D indicator on a trading chart.
First, visit Huobi Exchange, by clicking here. Below is the image of the homepage.
At the header section, click on Spot Trading, you will notice a dropdown, then click on Exchange. Look at the image below for more understanding.
You have successfully arrive at the Exchange section of Huobi Exchange. You can search for your coins and place your trade. But that's not what we are after currently, as we would like to see the chart bigger. You have to click on Full Screen button, which you can clearly see below.
This is how the trading chart looks like on Huobi Exchange(image below).
To add the A/D indicator on the chart, you will have to click on Index, and search for the Accumulation/Distribution indicator and click on it once you have found it. Look at the image below for more understanding.
This is how a trading chart with A/D indicator looks like on Huobi Exchange.
You can modify the A/D indicator to your preference, by clicking on the setting(a.k.a format) options. You can change style of the A/D indicator, by changing the color or the intensity to your choice. For me, I'm changing the color from ash to black and I'm increasing the intensity.
Once you have chosen your preference in the A/D indicator setting, you are now ready to start using the A/D indicator on Huobi Exchange platform.