Accumulation Distribution

Accumulation Distribution uses volume to confirm price trends or warn of weak movements that could result in a price reversal.

• Accumulation: Volume is considered to be accumulated when the day's close is higher than the previous day's closing price. Thus the term "accumulation day"
• Distribution: Volume is distributed when the day's close is lower than the previous day's closing price. Many traders use the term "distribution day"

Therefore, when a day is an accumulation day, the day's volume is added to the previous day's Accumulation Distribution Line. Similarly, when a day is a distribution day, the day's volume is subtracted from the previous day's Accumulation Distribution Line.

The main use of the Accumulation Distribution Line is to detect divergences between the price movement and volume movement. An example of the Accumulation Distribution Line is shown below in the chart of the Nasdaq 100 exchange traded fund QQQQ:

Volume Interpretation
The basic interpretation of volume goes as follows:

• Increasing and decreasing prices are confirmed by increasing volume.
• Increasing and decreasing prices are not confirmed and warn of future trouble when volume is decreasing.

For more in-depth analysis of Volume (see: Volume).

High #1 to High #2

The Nasdaq 100 made an equal high (i.e. Double Top formation) at High #2; however, the Accumulation Distribution Line failed to make an equal high, in fact it made a lower high. On average, less volume was transacted on the move higher at High #2 than occured on the first move higher at High #1; thus, this could be interpreted as there being less strength and conviction behind the rally in the Nasdaq the second move higher. This failure of the Accumulation Distribution Line signaled a strong bearish divergence.

High #3 to High #4

Again, the Accumulation Distribution line made a lower high, even though the Nasdaq 100 this time made a higher high. This bearish divergence warned that the second move to make a higher high in price lacked conviction.

Low #1 to Low #2

The bearish divergence from Low #1 to Low #2 confirmed the later bearish divergence of High #3 to High #4. On average, more volume was occuring on down days than up days, even while the Nasdaq 100 was making higher highs and higher lows, which usually is considered a sign of strength.

In summary, the Accumulation Distribution Line is a very effective tool to confirm price action and show warnings of potential price reversals. It is important to incorporate volume into price analysis, and the Accumulation Distribution Line is one of many indicators to do just this. Other indicators that include price and volume analysis and could be considered more accurate than the Accumulation Distribution Line include the Chaikin Oscillator (see: Chaikin Oscillator), Money Flow Index (see: Money Flow Index), and Price Volume Trend indicator (see: Price Volume Trend).

Forex Trading Robot - An Honest Review and Findings

A hard honest review and analysis of Forex trading robots and systems means just that. We've taken the time to look in depth at current trading systems and automated ones to find fact from fiction. What we set out to do is to find out if in fact Forex trading robots can produce consistent results.

Here's what we found:

There are loads of Forex systems being offered in the market place ranging anywhere from thousands of dollars down to a few hundred dollars. The first question we had to ask ourselves was, is one better than the other based on price alone?

We bought a trading course for $600 and compared it to a trading robot for $147. What we found is that both systems were based on a set of rules and indicators and when certain conditions were met, a trade was triggered. Both systems produced decent results, but only for a short while. The $600 system failed after 2 months of forward testing, while the cheaper system continued to produce consistent positive results. Being that both systems were designed on a set of indicators, parameters and rules, we concluded that the price of a Forex robot is irrelevant to the results. Therefore, a cheaper system can in actuality out perform a more expensive system.

Our Second Finding:

After reviewing various Forex robots in the price range of $99 to $150, we tested three of them side by side. Each had its own set of indicators and each traded on the MetaTrader 4 platform. All three produced positive results after a back test of three years, however some experienced larger draw downs than others. Given that all there produced positive results; we then concluded that the safest Forex robot to go with was the one that had the least amount of draw down in order to protect our risk capital for long term sustainable growth.

Our Overall Conclusion:

Price does not matter when it comes to Forex Robots and systems. Cheaper systems can outperform more expensive ones. Forex robots do and can work, you just have to use sound money management and at least have a basic understanding of the Forex market. Aim for a risk to reward ratio of at least 1 winning trade is equal to 4 losing trades. You will lose trades, that's a given, however if managed properly you can profit even if only you are right 25 percent of the time with a risk to reward ratio of 1 win equals 4 losers. There are plenty of great Forex robots out there today. Be sure to do your own research before you buy.

By Timothy Rohrer

Make a Living With FOREX

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