Ex. - 1 Conclusion

Here is the last example of the EUR/USD pair and the A/D indicator using daily graphs. The past two examples showed that downtrends in the pair were not sustained as volume did not follow the price action. Let’s see what happened during this time period.

1. In the beginning of September the Dollar starts a rally. By the end of the month the pair drops close to 700 pips. The A/D indicator converges with this downward movement. However, we have seen how Dollar buying has not been long lasting.
   
   
2. The month of October is one of consolidation and the preference for the Euro can be seen by its accumulation (A/D indicator heading up).
   
   
3. The start of November is a good example of divergence as price drops for several sessions while the A/D line does not follow in a similar manner. The volume for this new Dollar rally must have been small. (Compare it to September’s rally.)
   
   
4. As the divergence predicts, there is a 500 pip Euro rally starting in December. It stalls in February. Dollar buying, again, comes on low volume. Right after, the pressure for Euro buying again shows itself.
   
   
5. Starting in March, near 1.1800, the pair climbs higher than 1.2900. Most of that climb comes in a one month period and the accumulation of Euros can be seen by the large rise in the A/D panel.

The graphs and signals covered in this example do not help much in placing timely trades as they are very long term. They can provide a good measure if the current long term trend is going with the direction of volume as traders participate or not. Trends that go against the direction of volume are usually going against fundamentals too.

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