What Is Accumulation/Distribution Indicator?
Accumulation/Distribution Indicator is a technical analysis tool used to measure the flow of money into and out of an asset. It is based on the premise that if more money is flowing into an asset, then it will increase in price over time. Conversely, if more money is flowing out of an asset, then its price will decrease over time. The indicator uses volume data to determine whether there are net inflows or outflows from a particular security. If the Accumulation/Distribution line rises above zero, this indicates that buying pressure has been greater than selling pressure and vice versa for when it falls below zero.
The Accumulation/Distribution Indicator can be used as part of a trading strategy by looking at divergences between price action and the indicator itself; these divergences may indicate potential reversals in trend direction before they occur in actual prices. Additionally, traders may use crossovers between two different moving averages of the indicator as buy or sell signals depending on their trading style and risk tolerance levels. Ultimately, understanding how to interpret this indicator can help traders make better decisions about when to enter or exit positions within markets with higher accuracy rates compared to other methods alone.