Accumulation/Distribution Bitcoin Trading Analysis and Accumulation/Distribution Bitcoin Trading Signals

Developed by Marc Chaikin

This btcusd indicator is used to assess the cumulative flow of money into and out of bitcoin crypto.

Originally used for stocks trading, when it comes to stocks trading "volume" is the amount of shares traded in a particular stock, this volume is a direct reflection of the money that is coming into and out of a stock.

The basic principle behind AD is that volume(or money flow) is a leading indicator of the bitcoin price. (Volume precedes bitcoin price).

Tick volume is the measure of btcusd price changes (ticks) received by a crypto broker during a particular trading period/interval. The tick volume is incorporated by many crypto brokers in their charting software.

Interpretation

This volume indicator is used to determine if volume is increasing or decreasing as the btcusd price on a cryptocurrency chart is rising or falling.

Uptrend

If the btcusd price on a cryptocurrency chart is rising then the Accumulation/Distribution should also be rising. This shows that the btcusd price move is being supported by volumes and the move upwards has strength and is sustainable.

If on the other hand btcusd price is moving up and the volumes are not, the strength behind the move is reducing; this creates divergence between btcusd price and indicator and warns of a possible move in the opposite direction.

Downtrend

If the btcusd price on a cryptocurrency chart is falling then the AD should also be falling. This shows that the btcusd price move is being supported by volumes and the move downwards has strength behind it.

If on the other hand btcusd price is moving down and the volumes are not, the strength behind the move is reducing; this creates divergence between btcusd price and AD and warns of a possible move in the opposite direction.

Bitcoin Trading Analysis and Generating Bitcoin Trading Signals

Below is an example of a cryptocurrency chart and the technical analysis explanation

From the chart above we can separate the chart into three parts, part A, B and C.

A - Upward bitcoin trend line on chart as well as on the Accumulation/Distribution

B - Downward bitcoin trend line on chart as well as on the Accumulation/Distribution

C - Upward bitcoin trend line on chart as well as on the Accumulation/Distribution

As long as the btcusd price and the indicator are moving in the same direction then the btcusd price move has enough momentum to continue moving in that direction as shown above

Bitcoin Trend Line Break

From the above chart we can see that once the bitcoin trend line on the AD was broken then the btcusd price bitcoin trend line was also broken.

Looking at the chart below we have added vertical lines to represent the points where the bitcoin trend lines were broken, both on the btcusd price chart and the indicator.

Comparing the bitcoin trend lines on the indicator and the btcusd price those of the AD were broken before those of the chart. This is because volume always precedes bitcoin price.

Trading signals

Exit

Exit signals are generated when the bitcoin trend line on the Accumulation/Distribution is broken. A bitcoin trend line break on the indicator warns of a possible reversal.

Entry

Once the bitcoin trend line on the AD is broken it warns of a possible reversal in the direction of the btcusd trading market.

However if we want to take a trade in the opposite direction it is always best to wait for a confirmation signal.

A confirmation signal is considered complete once both the indicator and the btcusd price breaks both their bitcoin trend lines.

Entry Signal Generated by Bitcoin Trend Reversal