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Accumulation and Distribution Indicator: Measuring Cryptocurrency Supply and Demand
Understanding the Indicator
The accumulation/distribution (A/D) indicator is a technical analysis tool used to assess the supply and demand dynamics of a stock, asset, or cryptocurrency. It measures the cumulative flow of money into or out of an asset over time, providing insights into whether buyers or sellers are dominating the market.
Interpretation
The A/D indicator calculates the difference between the day's closing price and the lowest recorded price during that day. A positive value indicates accumulation, suggesting that buyers are actively entering the market. Conversely, a negative value indicates distribution, signifying that sellers are offloading their assets.
The A/D indicator is particularly useful in identifying potential price reversals. When the A/D line diverges from the price movement, it suggests that a change in market sentiment is underway.
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