An accumulation/distribution indicator that works better against gaps and with trend coloring.
Accumulation/Distribution was developed by Marc Chaikin to provide insight into strength of a trend by measuring flow of buy and sell volume .
The fact that A/D only factors current period's range for calculating the volume multiplier causes problem with price gaps. They are ignored or even misinterpreted. True Accumulation/Distribution solves the problem by using True Range instead of only relying on current period's high and low.
Most of the time, True A/D reverts to producing the same values as the original A/D. The difference between True A/D and original A/D can be better seen when a gap has occurred, True A/D has handles it better than Accumulation/Distribution which a bearish close in period's range cause it to misinterpret the strong buy pressure as sell volume
The Moving Average Cloud is simply the filling between the moving average and the True A/D. This feature was inspired by D7R ACC/DIST closed-source indicator, kudos to D7R for making such neat visual indicators (but unfortunately all closed source!).
This indicator was made to extend the original work by adding MTF support and a moving average cloud and coloring.
Blue is more likely a phase of accumulation because the True A/D is above its moving average, whereas red is when this is more likely a phase of distribution.
Yellow is when the difference is below the margin, so we consider it is insignificant and that the trend is undecided. This can be disabled by setting the margin to 0.
While the color indicates if it's more likely an accumulation (blue) or distribution (red) phase or undecided (yellow), the cloud's vertical size allows to assess the strength of this tendency and the horizontal size the momentum, so that the bigger the cloud, the stronger the accumulation (if cloud is blue) or distribution (if cloud is red). Why is that so? This is because the cloud represents the difference between the current tendency and the moving averaged past one, so a bigger cloud represents a bigger departure from recently observed tendencies. In practice, when there is accumulation, a pump in price can be expected soon, or if it already happened then it means it is indeed supported by volume, whereas if distribution, either a dump is to be expected soon, or if it already happened it means it's supported by volume.
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* Add state transition signals, can be used for alerts (user request).
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* Tweak default margin parameters, increase it from 0.001 (0.1% change between bars) to 0.005 (0.5%) to consider a change to be significantly directional.
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* Cosmetic change: remove the signals boolean values from being displayed in the indicator's pane's price line.
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* Revert default margin from 0.005 back to 0.001 (0.1% change). * Add an alternative way to colorize the graph (percent change over time).
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* Add a new way to color the cloud: Percentile of tick variability. (But it seems more noisy and less useful in my use cases - maybe it can be more useful for shorter timescales or more variable assets?).
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* Internal maintenance: simplify by deduplicating code already present in f_maSelect library tradingview.com/script/gHCoi1N8-f-maSelect/ (no functionality change in this update)
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* Fix typo in tooltip
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* Fix another typo
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* Fix non-sensical tooltip for the cloud coloring description.
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* Extend tooltip for the margin colorization algorithms to describe them all.
Thanks for your hard work. I look forward to the strategy;). Happy holidays.
TradersVIP
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Thanks and yello?
tartigradia
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@TradersVIP, Yellow is when the difference is below the margin, so we consider it is insignificant and that the trend is undecided. Here are additional usage instructions, that I'll add later in the main indicator's description above: while the color indicate if it's more likely an accumulation (blue) or distribution (red) phase or undecided (yellow), the cloud allows to assess the strength of this tendency, so that the bigger the cloud, the stronger the accumulation (if cloud is blue) or distribution (if cloud is red). Why is that so? This is because the cloud represents the difference between the current tendency and the moving averaged past one, so a bigger cloud represents a bigger departure from recently observed tendencies. In practice, when there is accumulation, a pump in price can be expected soon, or if it already happened then it means it is indeed supported by volume, whereas if distribution, either a dump is to be expected soon, or if it already happened it means it's supported by volume.
TradersVIP
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can you give explane about the collors?
tartigradia
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@TradersVIP, Ah yes sorry, blue is more likely a phase of accumulation because the True A/D is above its moving average, whereas red is when this is more likely a phase of distribution.
leo_Meschete
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Definately more accurate than most. Thank you
cabierman
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This looks incredible and matches my charts on the 1 hour for all the ETFs I trade. How would I set up alerts for this? Please advise and thanks in advance. Is there a snippet of code you could place that would trigger both buy & sell signals?