Accumulation and Distribution Divergence V0

The Accumulation and Distribution Divergence V0 indicator identifies potential market reversals and trend continuations by detecting regular and hidden divergences between price action and the Accumulation/Distribution volume flow.

Usage

This tool can be used to spot discrepancies between price movement and the underlying buying/selling pressure.

• Regular Bullish Divergence (R): Occurs when price makes a lower low but the indicator makes a higher low, suggesting a potential bullish reversal.
• Regular Bearish Divergence (R): Occurs when price makes a higher high but the indicator makes a lower high, suggesting a potential bearish reversal.
• Hidden Bullish Divergence (H): Occurs when price makes a higher low but the indicator makes a lower low, suggesting trend continuation.
• Hidden Bearish Divergence (H): Occurs when price makes a lower high but the indicator makes a higher high, suggesting trend continuation.

The indicator plots labels ('R' for Regular, 'H' for Hidden) on the oscillator to signal these occurrences.

Details

The script calculates the Money Flow Volume (MFV) by comparing the closing price to the trading range of the bar and multiplying it by volume. This values are then accumulated over time to create a cumulative line, which is then smoothed using a Simple Moving Average (SMA).

The divergence detection logic uses a fractal-based approach, looking back at peaks and troughs (pivots) in both price and the indicator to determine if the relationship between them has diverged from the standard correlation.

Settings

• Smooth Length: Determines the period used to smooth the cumulative Accumulation/Distribution line. Increasing this value will result in fewer, more significant divergence signals, while decreasing it will provide more sensitive detection.

FAQ

How do I interpret the labels on the chart?

Labels marked with 'R' indicate regular divergences, which typically suggest a potential trend reversal. Labels marked with 'H' indicate hidden divergences, which often suggest that the prevailing trend is likely to continue.

Can I use this on any timeframe?

Yes, the Accumulation and Distribution Divergence V0 can be applied to any timeframe, though volume-based indicators are often more reliable on higher timeframes where volume data is more consolidated.

How can I access Accumulation and Distribution Divergence V0?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.