What to look for:
- When this indicator moves up, it means buy pressure is increasing and the other way around for sell pressure. Crossing 0 means that trend has changed in the given period (it is best to look for confirmation of buy/sell pressure in larger TFs)
- Overbought above 40 and oversold below -40 (these numbers vary depending on the security. Look for historical levels to determine overbought and oversold conditions of each security)
- Regular divergence shows that momentum of a trend is declining. Hidden divergence implies continuation of a trend. The non-bound mode should be more accurate for identifying divergence.
- Failure swings can detect potential reversals.
Please read Relative Strength Index and Money Flow for more information and similar disclaimers.
- hlc3 ( AKA typical price) as input source might be better than "close" as it captures more information. If you use hlc3 as a source, then change the chart type to line and set hlc3 as the source for identifying divergence.
- Use hybrid tickers e.g.(BITFINEX:BTCUSD+COINBASE:BTCUSD+BITSTAMP:BTCUSD)/3. Volume-based indicators are susceptible to wash trading/ printing and hybrid tickers mitigate this issue.
- In non-bound mode, small TFs with longer length should be more accurate than larger TFs with standard length (same is true for many other indicators)
I have developed 4 indicators based on a simple but elegant concept of A/D ratio. A/D ratio is equal to (current close - previous close)/True Range (when there are no price gaps, True Range = High - Low)
1) What you see on ADV indicator as darker green and red is equal to A/D ratio x .
2) ADL indicator shows the summation of ADV
3) ADMF (or ADP in non-bound mode) shows Moving Average of ADV
4) ADP shows relative accumulation strength which is calculated as RMA(accumulations)/RMA(accumulation + distribution). ADP equation is based on equation which is RMA(gains)/RMA(gains + losses). That is why these two indicators look quite similar.
PS: Please leave a like if you find these indicators useful. I am working on improvements on these and other indicators. I am trying my best to keep them as simple as possible. Please let me know in the comments if you want me to make future indicators even simpler.
Complementary indicators based on the same concept:
ADL: a replacement for Chaikin's Accum/Dist, , and
ADV: a replacement for regular indicator
ADP also has a scaled RSI and ADMF built in (ie ADMF is obsolete).
- made a minor change to the way price is factored
- minor change in input options
Sorry, I am a beginner
I found your comment above " Overbought above 40 and oversold below -40"
I found , over various stocks that the value moves between the range of 0 to 100. So, should we take the values as , say +80 to +20 , instead of +40 to -40 ?
Also, in the INPUT section, there is an option "A/D weight (At 1 all volume is included)" . Is there any reference on how to choose it?
Many thanks for this great indicator
thanks. appreciate your work.
Near points of potential reversal, candles become more indecisive hence the AD ratio gets smaller leading to smaller AD volume. If aggregated using moving averages, you'll see divergence in most cases. You need to backtest it to find the best TF. See my ADMF indicator for examples of divergence. In this indicator, I have shown another way of using it based on the gap between price and volume momentum