The Accumulation Distribution line is a way analysing the supply and demand of a particular asset, in this case bitcoin, by looking at the price and the volume. If the price is going up and volume is low it will make less of a change to the accumulation distribution line compared to when there is a large amount of volume.
What is the Accumulation Distribution Line
The Accumulation Distribution Line is supposed to show the changing in trend by looking for demand in the asset to increase - for example if the indicator is moving up yet the price is moving down this is supposed to indicate a change form oversupply to better demand and is hence a buying point. Traders look for the indicator to be moving in the opposite direction to the price!
How do Accumulation Distribution Line's work?
The Accumulation Distribution Line is calculated by taking ((Close – Low) – (High – Close)) / (High – Low) * Period's volume.
Example Chart Accumulation Distribution Line and Analysis
If you at the USD BTC price chart above you can see the accumulation distribution line showing a buy signal as the Accum Dist line uptick is strong due to the volume whilst the price seems to be solidifying. This is showing an increase in demand that is the precursor to a price move.
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