As July ends, markets face a crucial transition: fading trade optimism, rising inflation risks, and major central bank meetings – including the Fed and the BOJ – will test momentum. With low summer liquidity, macro shocks could trigger outsized swings.

KEY INDICATORS

Currency moves

The US dollar rose as trade optimism faded.

Markets suggest the “TACO trade” (Trump Always Chickens Out) narrative is losing momentum.

The yen remained volatile ahead of Japan’s upper house election.

Commodities and equities

Oil prices climbed after drone strikes in Iraqi Kurdistan raised supply concerns.

Gold edged lower as bond yields rose, and the dollar strengthened.

The S&P 500 and Nasdaq hit record highs on strong AI-related earnings.

Tesla and other major tech stocks fell despite solid results, reflecting “sell-the-news” reactions.

Global markets paused after trade-driven gains as inflation data and central bank updates approached.

Asia and the week ahead

Asian markets were mixed, with gains in Hong Kong and Shanghai and losses in Tokyo.

This week’s earnings reports include Alphabet, Tesla, and Microsoft.

Wednesday will bring US CPI and PPI data, ECB minutes, and BOJ remarks.

Friday will deliver Japan’s election results, OPEC+ developments, and tariff decisions.

Political risk from Japan and AI-related investigations led by BRICS may shift sentiment midweek.

MARKET MOVERS

Nasdaq 100

• Technical breakout: Nasdaq continues to rally and is approaching the 23,300–23,350 resistance zone. A confirmed close above this range would signal a breakout continuation, while failure to hold may trigger short-term profit-taking.
• Target projection (bullish): A breakout above 23,350 opens the path to 23,600–23,700, with potential to extend to 24,000–24,200 by August, supported by bullish analyst forecasts pointing to 25,000+ by year-end.
• Target projection (bearish): A break below 23,000 may lead to further downside towards 22,800–22,700, reflecting fading momentum and speculative unwind.
• Opening expectation: Nasdaq futures indicate a bullish open near 23,250–23,320, driven by strong Q2 earnings (notably from Alphabet/AI), dovish Fed signals, and renewed trade optimism.
• Primary support zone: 23,100–23,150 (20-day moving average and pivot cluster).
• Secondary support zone: 23,000 (psychological support).
• Tertiary support zone: 22,800–22,700 (retracement zone if sentiment deteriorates).
• Strategy (bullish approach): Buy on a confirmed breakout above 23,350 with targets at 23,600 and 24,200.
• Strategy (bearish approach): Short below 23,000 with targets at 22,800 and 22,700.
• Stop-loss level: Below 23,100 for bullish positions; above 23,400 for bearish positions.
• Key catalysts this week: US CPI and PPI data, ECB minutes, BOJ remarks, tariff decisions, and earnings updates from Apple, Microsoft, Alphabet, and Tesla.
• Market context: Nasdaq is at a critical technical juncture. Momentum remains strong, with over 60 consecutive sessions above the 20-day MA – the longest since 1999. However, signs of overbought conditions and speculative excess suggest traders should use tight stops and remain alert to whipsaw risks.

Nikkei 225

• Technical breakout: Nikkei is breaking out of a bullish flag pattern, with momentum building above 40,300. A confirmed close above 40,620 would signal breakout continuation, while failure to hold above trend support may trigger a deeper retracement.
• Target projection (bullish): A sustained move above 40,620 opens the path to 42,500–42,900, supported by strong earnings, softening JGB yields, and improving economic surprise indices.
• Target projection (bearish): A breakdown below 39,000 could extend losses to 38,000–37,700, aligned with Fibonacci retracement levels from the May–July rally.
• Opening expectation: Nikkei is set to open around 40,300–40,400, reflecting positive sentiment following the July election and upbeat Japanese earnings.
• Primary support zone: 39,000–39,100 (main trendline and May low).
• Secondary support zone: 38,500–38,600 (retracement area).
• Tertiary support zone: 38,000–37,700 (deeper correction zone if sentiment weakens).
• Strategy (bullish approach): Buy on a confirmed breakout above 40,620 with targets at 42,500 and 42,900.
• Strategy (bearish approach): Short below 39,000 with targets at 38,500 and 37,700.
• Stop-loss level: Below 39,000 for bullish positions; above 40,300 for bearish positions.
• Key catalysts this week: Japan’s upper-house election outcome, long-term JGB yield volatility (30-year above 3.2%), and continued strength in Citigroup’s Economic Surprise Index and earnings revision momentum.
• Market context: The Nikkei is in a medium-term uptrend, supported by strong fundamentals and a bullish technical structure. However, rising yields and political uncertainty post-election may introduce volatility. Traders should manage positions with disciplined stops and watch for confirmation above key resistance.

DAX 40

• Technical breakout: DAX is trading above the key pivot at 24,483.70, suggesting continued upside towards the 24,852.67 resistance level. Holding above 23,945.50–24,000 keeps the uptrend intact, while a drop below 23,945.50 – especially towards 23,701.36 – may signal weakening momentum and a deeper retracement risk.
• Target projection (bullish): A breakout above 24,852–24,900 opens the path to 25,000–25,500, supported by Germany’s fiscal stimulus and strength in the defence and tech sectors.
• Target projection (bearish): A drop below 23,701.36 may extend losses to 23,300–23,000 if price action breaks beneath the key pivot zone.
• Opening expectation: DAX is expected to open around 24,300–24,400, driven by broad global equity strength and positive sentiment from Germany’s fiscal support measures.
• Primary support zone: 24,483.70 pivot and the 127.2% Fibonacci cluster near 23,945–24,000.
• Secondary support zone: 23,701.36, a major swing low and technical overlap level.
• Tertiary support zone: Around 23,300, representing the deeper retracement zone and failure point for the bullish structure.
• Strategy (bullish approach): Buy above 24,483.70 with targets at 24,900 and 25,500. Use a stop-loss below 23,940 to protect against pivot failure.
• Strategy (bearish approach): Short below 23,700 with targets at 23,300 and 23,000. Use a stop-loss above 24,850 to avoid upside reversal.
• Range strategy: Fade within 23,945–24,850 until a breakout confirms. Buy near the lower bound, sell near the upper bound, with tight stop-losses.
• Key catalysts this week: Germany’s €500 billion stimulus plan boosting sentiment in domestic demand, defence, energy, and tech sectors. ECB policy commentary and global trade headlines ahead of August rate guidance. Earnings from SAP and other German corporates may drive index momentum.
• Market context: Germany’s fiscal stimulus is driving bullish sentiment across sectors like defence, technology, and banking. Stocks such as Rheinmetall, Siemens Energy, and Commerzbank have outperformed in 2025. Despite global headwinds, sustained capital inflows into DAX-listed exporters continue to position the index as a top global performer this year.

NEWS HEADLINES

Global policy and political shifts

Japan’s upper house vote this Friday could reshape fiscal policy, yen sentiment, and the Bank of Japan’s communication.

The ECB kept rates unchanged and warned of growing global trade risks, reinforcing a cautious stance.

The BRICS summit ended with a joint call for global AI regulation and stronger South–South economic cooperation.

The US–Japan tariff deal may offer relief, but Trump’s 1 August tariff deadline still poses risks for broader markets.

Prime Minister Starmer is lobbying Trump to lift US tariffs on UK exports, including steel and Scotch whisky.

Currency movements and central bank focus

The US dollar held steady following the ECB rate decision, with attention now turning to upcoming Fed and BOJ meetings.

The Japanese yen remains volatile ahead of election results and policy signals from the BOJ.

Valeo cut its sales forecast, citing a €750 million forex hit tied to trade tensions and dollar strength.

Market trends and sector developments

Oil prices rose after drone strikes in Iraqi Kurdistan reignited global supply concerns.

Copper futures hit record highs as traders anticipated US tariffs starting on 1 August.

Gold declined as rising bond yields, and a stronger dollar reduced safe-haven demand.

HSBC outlined five risks to the US equity rally, including rising yields, AI fatigue, and doubts about Fed credibility.

US equities showed post-earnings fatigue, with stocks like Netflix and Tesla leading late-session declines.

Asian stocks retreated slightly as investors reduced risk exposure ahead of tariffs and central bank meetings.

Tokyo’s Nikkei cooled after recent gains, while broader regional sentiment held firm.

Tokyo’s core CPI reached 2.9% in July, increasing pressure on the BOJ to revise its inflation outlook.

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Please refer to the table below for more details:

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The average directional index (ADX) is a widely used technical indicator that helps traders assess the strength of a trend. It doesn’t indicate whether the market is moving up or down—instead, it shows how strongly it’s moving in either direction. By providing a clear numerical value to gauge momentum, the ADX indicator allows traders to identify trending conditions, avoid range-bound markets, and make more informed decisions across various asset classes. In this article, we’ll explain what ADX is, how it works, how to use it effectively, and how to avoid common pitfalls.

What Is Average Directional Index (ADX)?

In trading, knowing the direction of a market is only half the battle. The real challenge is understanding how strong that trend is—whether it has the momentum to continue or is likely to fade. That’s where the average directional index (ADX) comes into play. Developed by J. Welles Wilder, the average directional index indicator is a technical analysis tool used by traders to measure the strength of a price trend, regardless of whether it’s moving upward or downward.

Technical analysis is a broad suite of tools and strategies that traders use to evaluate market trends and make informed trading decisions. The ADX indicator fits within this suite as a key technical analysis tool, often used alongside other indicators to improve accuracy and develop effective trading strategies. The ADX indicator assigns a numerical value that quantifies trend strength, ranging from 0 to 100. This helps traders determine if the market is trending strongly enough to justify entering a position or if it’s better to stay out during flat or choppy conditions. By focusing on strength rather than direction, ADX acts as a powerful filter, helping traders reduce noise and avoid weak or false trading signals.

How Does the ADX Indicator Work?

The ADX indicator is part of the Directional Movement System, which also includes the Positive Directional Indicator (+DI) and Negative Directional Indicator (−DI). While +DI and −DI measure the direction of movement, ADX focuses solely on the strength of the trend.

The ADX itself is plotted as a single line ranging from 0 to 100. ADX readings below 20 suggest a weak trend, while readings above 25 typically signal a trending market with increasing strength. Traders use these ADX readings to interpret whether the market is consolidating or trending, and to gauge the strength of the current move. The higher the value, the stronger the trend—whether it’s bullish or bearish.

For example, during the 2022 U.S. interest rate hike cycle, the EUR/USD showed an ADX value rising above 40. This confirmed a strong downtrend as the dollar strengthened rapidly. When the ADX peaks and starts to decline, it often signals that trend momentum is weakening. This change in ADX readings can indicate a potential trend reversal or a period of consolidation, alerting traders to possible changes in market direction.

Average Directional Index Calculation

The formula for the average directional index (ADX) is derived from the difference between the Positive Directional Indicator (+DI) and the Negative Directional Indicator (−DI) over a specific period—typically 14 periods. While most trading platforms like VT Markets’ MetaTrader 4 (MT4) and MetaTrader 5 (MT5) calculate the ADX automatically, understanding how it’s computed can help traders verify its signals and use it more effectively.

Here’s a clearer breakdown of the ADX calculation:

1. Calculate True Range (TR)

This measures market volatility and is the foundation for the average true range (ATR). The ATR is used to normalize directional movement and smooth the data, making it a key part of the ADX calculation.

TR = max[(High − Low), abs(High − Previous Close), abs(Low − Previous Close)]

2. Calculate +DM and −DM (Directional Movement)

• +DM = Current High − Previous High (only if it’s positive and greater than −DM, otherwise 0)
• −DM = Previous Low − Current Low (only if it’s positive and greater than +DM, otherwise 0)

Here, −DM represents negative directional movement, which helps identify downtrends. The calculation of +DM and −DM also involves comparing high and low prices to determine the direction and magnitude of price changes.

3. Smooth the Values over a 14-Period Average

• Smoothed TR = sum of TR over 14 periods
• Smoothed +DM = sum of +DM over 14 periods
• Smoothed −DM = sum of −DM over 14 periods

A moving average or exponential moving average (EMA) is used to smooth these values, reducing noise and making the indicator more reliable.

4. Calculate Directional Indicators

• +DI = (Smoothed +DM / Smoothed TR) × 100
• −DI = (Smoothed −DM / Smoothed TR) × 100

5. Calculate the Directional Index (DX)

DX = (|+DI − −DI| / |+DI + −DI|) × 100

6. Smooth the DX to Get the ADX Value

ADX = (Previous ADX × 13 + Current DX) / 14

The period used for these calculations is typically 14, but traders can adjust the period or use different periods to tailor the indicator’s responsiveness to price movements. Price range expansion is a key factor in the ADX’s ability to measure trend strength, as the indicator evaluates changes in the price range over the selected period.

Example: Calculating ADX on EUR/USD

Let’s say a trader is monitoring EUR/USD and the 14-day smoothed values are as follows, demonstrating typical ADX calculations in practice:

• Smoothed True Range (TR) = 0.0120
• Smoothed +DM = 0.0060
• Smoothed −DM = 0.0040

Now calculate:

• +DI = (0.0060 / 0.0120) × 100 = 50
• −DI = (0.0040 / 0.0120) × 100 = 33.33

Then:

• DX = (|50 − 33.33| / (50 + 33.33)) × 100
• DX ≈ (16.67 / 83.33) × 100 ≈ 20

Assuming the previous ADX was 18:

ADX = (18 × 13 + 20) / 14 = (234 + 20) / 14 = 18.14

This ADX value of 18.14 would suggest that the trend is still relatively weak. If the ADX crosses above 25 in the next few sessions, it may confirm the emergence of a stronger directional trend.

How to Use the Average Directional Index

Understanding how to use average directional index values is key to making confident, well-timed trading decisions. The average directional index helps traders determine whether the market is trending and how strong that trend is. Importantly, it does not indicate trend direction—only strength. The table below shows a quick guide on interpreting ADX readings:

Let’s say a trader is monitoring the Nasdaq 100. If the ADX line crosses above 25 while the +DI is above the −DI, this could generate a buy signal and indicate a strong bullish trend. Conversely, if −DI is above +DI, a sell signal may be present, suggesting a strong bearish trend. Either way, ADX readings above 25 confirm that the trend has sufficient strength for potential trading opportunities and help traders determine entry and exit points.

Many traders also watch for ADX turning points—for example, when the ADX line peaks and starts to decline (a falling ADX line), it may signal trend weakness or a weakening trend, even if price movement continues in the same direction. Recognizing trend weakness is important for managing exit points and avoiding false breakouts.

To enhance accuracy, traders often pair ADX with other technical indicators and technical analysis tools such as the momentum indicator RSI, moving average convergence divergence (MACD), or Bollinger Bands to confirm entries or exits. For example, combining an ADX reading above 25 with an RSI above 50 may strengthen the case for a bullish entry on a trending asset like GBP/USD. Using multiple technical indicators helps filter out more false signals and provides a more comprehensive view of price movements and trend momentum.

Why Traders Use the ADX Indicator

The average directional index indicator offers traders an objective measure of trend strength, making it an essential tool for both novice and experienced traders. Here’s why it is commonly used across different trading strategies:

1. Trend Confirmation

ADX helps confirm whether a market is trending or range-bound. An ADX above 25 suggests a tradable trend, while values below 20 indicate weak or sideways conditions.

2. Entry Timing

Instead of entering too early, traders use ADX to wait for confirmation. For example, after a breakout, they may wait until ADX rises above 25 before committing to a position.

3. Exit Strategy

A falling ADX can signal that an existing trend is losing momentum. This helps traders decide when to scale out, adjust stop-losses, or lock in profits.

4. Strategy Filter

ADX is often paired with indicators like RSI or Moving Averages. If RSI signals bullish momentum and ADX is above 25, traders gain added confidence in the trade setup.

Risks and Limitations of the ADX Indicator

While the ADX indicator is useful, it’s important to understand its limitations:

1. Lagging Signals

Since ADX uses historical price data, it reacts slowly. By the time it confirms a trend, part of the move may have already happened.

2. No Directional Clarity

ADX measures strength, not direction. Traders must rely on +DI and −DI lines—or other tools—to identify whether the trend is bullish or bearish.

3. Limited Use in Sideways Markets

In flat or low-volume markets, ADX may give weak or misleading signals. It performs best in clearly trending conditions.

4. False Signals During High Volatility Events

During major news releases or sudden spikes in volatility, ADX can produce misleading readings, temporarily inflating trend strength even if no sustained trend follows.

Common Mistakes to Avoid When Using the ADX Indicator

While the ADX indicator is a reliable tool, it can be misused if applied without context or supporting signals. Here are common pitfalls to avoid:

• Ignoring Directional Lines (+DI and −DI): ADX shows trend strength, not direction. Relying on ADX alone without checking whether +DI or −DI is dominant can lead to poor entry decisions.
• Solely Relying on ADX Without Confirmation: Traders who use ADX in isolation often miss important price context. ADX should be part of a broader strategy that includes price action, support/resistance, or additional indicators.
• Using the Same ADX Setting for All Timeframes: Many traders apply the default 14-period setting across every chart. However, shorter timeframes may require faster settings to reflect quicker price action.
• Overlooking ADX Slope and Momentum: A high ADX value above 25 may seem strong, but if the line is sloping downward, it may signal weakening momentum. Watching the slope helps confirm strength and durability.
• Entering Too Late Based on ADX Alone: Waiting for ADX to reach high levels (like 40 or 50) can delay entries. Often, the most profitable part of the trend may have already passed.
• Misreading Spikes During High Volatility Events: During news releases or large candles, ADX can temporarily spike, giving a false sense of trend strength even if the price soon reverses.

In Summary

The average directional index (ADX) is a valuable tool for measuring trend strength and improving trading decisions. By identifying whether a market is trending or consolidating, ADX helps traders apply the right strategy at the right time. When paired with directional indicators (+DI and −DI) and supported by other tools like RSI or moving averages, the ADX indicator becomes even more reliable. However, it’s important not to rely on ADX alone. Understanding its signals, limitations, and how it fits within a broader strategy can lead to more consistent and informed trades.

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Whether you’re back-testing with the VT Markets demo account or trading live with competitive spreads, VT Markets provides the flexibility and performance traders need. If you’re new to the ADX indicator or want to refine your approach, our Help Centre is available 24/7 with clear guides, tutorials, and platform support.

Create an account with VT Markets today and trade trend strength with confidence.

Frequently Asked Questions (FAQs)

1. What is the average directional index (ADX)?

The average directional index (ADX) is a technical indicator used to measure the strength of a price trend. It ranges from 0 to 100, where higher values indicate stronger trends. ADX does not show trend direction, only its strength.

2. What is the average directional index used for?

It’s used to measure the strength of a trend, helping traders identify whether the market is trending strongly or lacking momentum.

3. How to use the average directional index (ADX)?

Traders use ADX to confirm if the market is trending. A value above 25 generally signals a strong trend, while values below 20 suggest sideways movement. ADX is best used with other tools like +DI/−DI lines or RSI for confirmation.

4. How to calculate the average directional index (ADX)?

ADX is calculated by smoothing the difference between +DI and −DI over a chosen period (typically 14). It involves steps like computing True Range (TR), +DM/−DM, and Directional Index (DX), followed by smoothing DX values. Most platforms calculate it automatically.

5. Can I use the ADX on any asset class?

Yes, it works on forex, stocks, indices, precious metals, and even cryptocurrencies. ADX is a flexible indicator that adapts well across different markets.

6. What is a good ADX value for trend confirmation?

Generally, a reading above 25 suggests a strong trend. Values below 20 indicate weak or sideways conditions.

7. Does the ADX predict trend direction?

No. ADX only measures the strength of a trend. To determine direction, use the accompanying +DI and −DI lines or other trend indicators.

8. Should I use ADX alone or with other indicators?

ADX is most effective when used with other tools. For example, combining ADX with RSI can confirm both trend strength and momentum, improving trade accuracy.

 July 28, 2025 , Sydney, Australia – VT Markets is using the ‘power of football’ to make a positive impact in communities across Asia, supported by a partnership with Premier League club Newcastle United.

Celebrating its 10th anniversary, VT Markets committed to donating 1,000 Newcastle United branded footballs to schools across Southeast Asia. The initiative aims to deepen the brand’s presence in Asia while creating opportunities for future generations to enjoy the sport.  

Additionally, VT Markets proudly donated £20,000 to the Newcastle United Foundation, commemorating the club’s Carabao Cup victory and return to the UEFA Champions League. This contribution celebrates the club’s incredible achievement while supporting its official charity partner’s mission to harness the unifying power of football to connect, motivate, and inspire people through community, education, health, and sports programmes.  

VT Markets’ Corporate Social Responsibility initiatives have been designed to champion growth through strategic partnerships and investments, with the aim of expanding the brand’s footprint in Asia, while helping to nurture economic development in the region. By driving growth through impactful collaborations, VT Markets is not only deepening its regional presence but also helping to build a stronger, more resilient future for these communities. With plans already underway to bring similar initiatives to Latin America, the brand is looking to replicate this positive impact across even more global markets.

As Newcastle United’s Official Financial Trading Partner, first-team players including Sandro Tonali, Jacob Murphy, Dan Burn, and William Osula, kicked off the initiatives during an exclusive Meet and Greet session hosted by VT Markets. Also in attendance was club legend Shola Ameobi, who brought his trademark charisma to connect with fans at the event. The Magpies were based in Singapore ahead of their first fixture in the nation since 1996, taking on fellow Premier League side Arsenal as part of the Singapore Festival of Football.  

Speaking as the CSR initiatives were launched at an exclusive client engagement event in Singapore, hosted by VT Markets, Newcastle United player and Newcastle United Foundation ambassador Dan Burn shared: “Our fans are the soul of this club, wherever we go in the world. The support we’ve felt from everyone in Singapore has been unbelievable and that’s a big reason why projects like this mean so much.  

“As players, football has helped to transform our lives so it’s really special to see VT Markets use their position to support young people and give back to these amazing communities – both in Newcastle and across Asia. We see the fantastic work that Newcastle United Foundation do back home and this donation will make a great contribution to changing their lives of many people in our community.”

VT Markets recently marked a thrilling debut year as Official Financial Trading Partner of Newcastle United by visiting St. James’ Park for the final match of the 2024/25 Premier League season. A history-making campaign saw Eddie Howe’s side win the club’s first domestic trophy in 70 years, which was quickly followed up with qualification for the UEFA Champions League.

This year also coincides with a significant milestone for VT Markets, celebrating a decade of innovation in the global financial markets. Over the past 10 years, the company has driven growth through collaborations, expanding its presence and making a lasting impact within the industry by helping to build a stronger, more resilient future.

“At VT Markets, we believe that true growth goes beyond numbers. Through our CSR initiatives, we aim to inspire, empower, and contribute meaningfully to the region’s development, laying the foundation for long-term opportunity and success. Our partnership with Newcastle United is about driving positive change both on and off the field, and we look forward to deepening our impact as we continue this exciting journey in Asia together,” Dandelyn Koh, Global Brand and PR Lead at VT Markets shared.

As Newcastle United prepare for a return to the UEFA Champions League, VT Markets remains a steadfast partner, supporting ambitions on the pitch while helping to drive positive social change off the pitch. The event in Singapore served as an opportunity to highlight shared values and the vision of both organisations, centred around growth, community, and giving back.

For media enquiries and sponsorship opportunities, please email media@vtmarkets.com, or contact:  

Dandelyn Koh  

Global Brand & PR Lead  

dandelyn.koh@vtmarkets.com   

Brenda Wong  

Assistant Manager, Global PR & Communications  

brenda.wong@vtmarkets.com 

The Accumulation/Distribution (A/D) Indicator helps traders assess the strength of an asset’s trend by analyzing both price movements and trading volume. It shows whether an asset is being accumulated (bought) or distributed (sold), providing valuable insights into market sentiment and potential trend changes. In this article, we’ll explore how the A/D indicator works, how to use it in your trading strategy, and why it’s a crucial tool for understanding market trends.

What Is the Accumulation Distribution Indicator?

The Accumulation/Distribution (A/D) Indicator combines price movement with volume to measure the money flow into and out of an asset. It is a valuable tool and a technical analysis tool for analyzing price and volume in financial markets. By evaluating this flow, the A/D indicator helps traders determine if an asset is being accumulated (bought) or distributed (sold). A rising A/D line suggests accumulation, meaning more buying pressure is present, while a falling A/D line indicates distribution, suggesting more selling pressure. This integration of volume into the price action provides a more reliable picture of market sentiment.

The strength of the A/D indicator lies in its ability to identify whether price movements are supported by strong volume. As a volume based indicator, it is used in various trading strategies to assess buying and selling pressure and market demand. A price increase without sufficient volume might indicate a weak trend, while a rise with strong volume confirms robust buying activity. By tracking these shifts in money flow, the A/D indicator helps traders spot potential reversals and better understand the strength behind trends, making it a powerful tool for market analysis.

How Does the A/D Indicator Work?

The A/D Indicator is calculated by combining the asset’s price movement with its volume. It is a cumulative indicator, meaning it continuously adds or subtracts values over time to create the accumulation distribution line, which helps visualize the overall accumulation or distribution of the asset. The core idea is to measure money flow into and out of an asset, giving traders a sense of whether more money is entering (accumulation) or leaving (distribution) the asset. The calculation involves money flow volume, which reflects the intensity of buying and selling activity and helps assess the strength of market demand and supply.

The Accumulation Distribution Formula

The A/D Indicator calculation consists of three steps:

1. Close Location Value (CLV)

The first step in the calculation is to determine the Close Location Value (CLV), which reflects where the closing price falls within the high-low range for the period. The CLV value ranges from -1 to 1:

• CLV = 1: Closing price is at the high (bullish).
• CLV = -1: Closing price is at the low (bearish).
• CLV = 0: Closing price is in the middle of the range (neutral).

The formula for calculating CLV is:

CLV = (C − L) − (H − C) / H− L

Where:

• C = Closing price
• H = Highest price for the period
• L = Lowest price for the period

Let’s break down the meaning:

• If the closing price is at the high, CLV = 1 (full accumulation).
• If the closing price is at the low, CLV = -1 (full distribution).
• If the closing price is exactly in the middle, CLV = 0 (indicating indecision).

2. Money Flow

Once CLV is calculated, the next step is to determine the money flow by multiplying the CLV value by the volume for that period:

Money Flow = CLV × Volume

• A positive money flow indicates that money is flowing into the asset (accumulation).
• A negative money flow means that money is flowing out of the asset (distribution).

3. Summing the Values

The A/D line is cumulative, meaning that the current A/D value is the sum of the previous A/D value and the current money flow. The A/D value is updated for each given period, such as a day, week, or month, reflecting ongoing accumulation or distribution during each specific timeframe. This cumulative calculation provides an ongoing measure of whether the asset is being accumulated or distributed over time.

The formula for the A/D line is:

A/D = Previous A/D + Money Flow

The first A/D value is equal to the money flow for the period. For all subsequent periods, the A/D value is the sum of the previous A/D value and the current money flow.

How to Read the Accumulation/Distribution Indicator

To read the A/D indicator, consider these key principles:

1. Look for a Rising A/D Line

When the A/D line rises, it suggests accumulation (more buying pressure than selling pressure), indicating that the asset is being bought and there is potential for an upward trend. If the A/D line forms higher peaks, it signals strong buying pressure and may indicate positive divergence, which can support the continuation of an uptrend.

2. Look for a Falling A/D Line

A falling A/D line suggests distribution (more selling pressure than buying pressure), meaning that the asset is being sold and there may be a downward trend forming. When the A/D line is moving downward and forms lower troughs, it can signal increasing selling pressure and a potential continuation of a downtrend.

3. Check for Divergence

One of the most valuable aspects of the A/D indicator is its ability to reveal divergence. When the price is making higher highs but the A/D line is failing to follow suit (or vice versa), it’s a strong indication that the current trend may be losing momentum. This is known as negative divergence, where the price makes higher peaks while the A/D indicator makes lower peaks, signaling a potential upcoming reversal or weakening of the current trend.

Example: When Tesla’s stock price rises from $200 to $300, but the A/D indicator starts to decline, it signals a bearish divergence, showing that buying pressure is weakening. The divergence between the A/D line and the pricing move can provide an early warning of trend changes. This often leads to a price reversal, and soon after, Tesla’s stock begins to fall, confirming the shift. Traders who noticed this divergence might have used it as an opportunity to sell the stock before the price drop occurred.

How to Use the A/D Indicator in Your Trading Strategy

Here’s how you can use the A/D indicator in your trading strategy:

1. Spotting Divergences

Use divergence between the A/D line (also known as the ADL indicator) and the price to predict potential trend reversals. A bullish divergence occurs when the price makes lower lows, but the A/D line makes higher lows, signaling a potential upward reversal. A bearish divergence occurs when the price makes higher highs, but the A/D line makes lower highs, suggesting a possible downward reversal.

2. Confirming Trends

Use the A/D line to confirm bullish or bearish trends. For example, if the A/D line is rising along with the price, it indicates a strong bullish trend. If the A/D line is falling while the price is rising, it suggests the trend may be weak and susceptible to reversal. The A/D line helps confirm whether pricing moves are supported by underlying volume, providing insight into the strength of the trend.

3. Volume Confirmation

Ensure that large price movements are backed by strong volume, which the A/D line will confirm. For example, if the price breaks above a resistance level, the A/D line should rise as well, confirming that the breakout is supported by strong buying interest. When a stock or currency pair is moving within a trading range, the A/D line can help identify whether accumulation or distribution is occurring inside the range. A rising A/D line during the trading range suggests accumulation and increases the likelihood of a successful breakout to the upside, while a falling A/D line may indicate distribution and a potential breakdown.

Example: If the major currency pair EUR/USD rises from 1.1000 to 1.1200, but the A/D indicator starts to decline, it signals a bearish divergence, showing that buying pressure is weakening. This often leads to a price reversal, and soon after, the EUR/USD begins to fall, confirming the shift.

Why Traders Use the A/D Indicator in Their Strategy

The A/D indicator is essential for traders because it helps them gauge whether the price movement is supported by strong volume or if it’s simply a result of price manipulation or a short-term surge. Here’s why it’s favored:

• Volume-Based Confirmation: The A/D indicator confirms that price movements are supported by volume, ensuring trends are more likely to be sustainable. A rising A/D line indicates that the trend is backed by strong buying or selling pressure.
• Spotting Money Flow: By measuring the money flow into and out of an asset, the A/D indicator provides valuable insights into the strength of the price trend. A rising A/D line suggests strong buying activity, while a falling A/D line shows increasing selling pressure. Additionally, the A/D indicator can help forecast potential stock price and potential stock price changes by analyzing volume and trend.
• Divergence Detection: The A/D indicator is useful for spotting divergence, which signals a change in market direction. If the price moves one way and the A/D line moves in the opposite direction, it suggests a weakening trend and a potential reversal.
• Identifying Market Sentiment: The A/D indicator helps traders gauge market sentiment by assessing whether an asset is being accumulated or distributed, indicating whether the trend is driven by strong investor conviction or short-term speculation. It also reveals the balance of buying and selling in the market.
• Detecting Potential Breakouts: The A/D indicator helps predict breakouts. When an asset is consolidating but the A/D line rises, it shows that buying pressure is building, signaling a breakout to the upside.
• Early Warning of Trend Weakness: The A/D indicator detects early signs of trend weakness. If the price rises but the A/D line stagnates or falls, it signals slowing buying momentum, giving traders a chance to exit before a reversal.

Risks and Limitations of the A/D Indicator

While the A/D indicator can be a powerful tool, it has limitations:

• False Signals in Low-Volume Markets: The A/D indicator can give misleading signals in markets with low volume, as the lack of significant volume can distort the money flow, making it less reliable.
• Lagging Indicator: As a lagging indicator, the A/D indicator follows price movements rather than predicting them, which can lead to delayed signals, especially in fast-moving markets.
• Does Not Account for Price Gaps: The A/D indicator does not account for price gaps on charts, which can result in missed or misleading signals during technical analysis.
• Works Best with Other Indicators: Relying solely on the A/D indicator may lead to inaccurate conclusions. It’s best used in conjunction with other indicators, like moving averages or RSI, for confirmation.
• Non-Accurate in Extremely Volatile Markets: In highly volatile markets or during major events, the A/D indicator may fail to keep pace with rapid price movements, leading to less reliable signals.

In Summary

The A/D indicator is a powerful volume-based tool that helps traders evaluate the strength behind an asset’s price trend. By combining price movement with volume flow, it provides deeper insights than traditional indicators, showing whether an asset is being accumulated (bought) or distributed (sold). While the A/D indicator is highly effective, it’s important to use it alongside other technical analysis tools to confirm signals and reduce the risk of false readings.

Put Your Knowledge into Practice with VT Markets

Now that you understand the basics of the A/D indicator, it’s time to put that knowledge into practice. With VT Markets, you can access advanced trading tools on platforms like MetaTrader 4 (MT4) and MetaTrader 5 (MT5), allowing you to track the A/D indicator alongside other key indicators to make smarter trading decisions. 

Additionally, you can practice and refine your skills with the VT Markets demo account, and take advantage of competitive spreads to enhance your trading experience. For further assistance, visit our Help Centre for all your support needs. 

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Frequently Asked Questions (FAQs)

1. What is the accumulation distribution (A/D) indicator?

The Accumulation Distribution (A/D) Indicator is a volume-based tool that helps traders assess whether an asset is being accumulated (bought) or distributed (sold) based on both price and volume.

2. What is the best time frame for the A/D indicator?

The A/D indicator works on any time frame, but it’s more effective in medium to long-term trends.

3. How do I know if the A/D indicator is accurate?

Always confirm the A/D signals with other indicators (e.g., MACD, RSI, or support/resistance levels) to ensure accuracy.

4. How does the A/D indicator differ from the On-Balance Volume (OBV)?

Both indicators measure volume flow, but the A/D indicator is more sensitive to price movements, providing a more detailed reading.

5. What does a rising A/D line indicate?

A rising A/D line suggests accumulation, meaning there is more buying pressure than selling pressure, which indicates a bullish trend.

6. What does a falling A/D line mean?

A falling A/D line indicates distribution, meaning that selling pressure is greater than buying pressure, suggesting a bearish trend.

7. Is the A/D indicator better for short-term or long-term trading?

The A/D indicator works well for both short-term trading and long-term trading, though it is typically more effective in medium to long-term trends.

8. What is the typical A/D line shape during strong trends?

During a bullish trend, the A/D line rises consistently, reflecting strong buying pressure. In a bearish trend, the A/D line declines, indicating strong selling pressure.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

The Japanese yen remains under pressure as shifting economic signals and trade developments shape market sentiment. This analysis breaks down the key drivers behind the USD/JPY movement, technical trends, and what traders should keep an eye on next.

Japanese yen weakens further as USD/JPY extends rally

The Japanese yen continued to depreciate against the US dollar on Friday, with the USD/JPY pair closing at 147.311 after peaking at 147.496.

This marked the second consecutive day of gains, with the pair rebounding from a session low of 145.856.

Traders responded to the implications of a revised US-Japan trade agreement and newly released inflation figures from Tokyo.

The updated trade deal reduced tariffs on Japanese exports to 15%, down from the previously proposed 25% under the Trump administration.

While this eased some pressure on Japanese exporters, it also underscored lingering trade uncertainties – posing a challenge for the Bank of Japan (BOJ) as it navigates policy decisions.

From a macroeconomic perspective, Tokyo’s core inflation data for July came in slightly below forecasts, though it remained above the BOJ’s 2% target.

This sustained inflation level is fuelling speculation around a possible interest rate hike later in the year, despite expectations that the central bank will leave rates unchanged at its upcoming policy meeting.

Technical analysis

On the 15-minute USD/JPY chart, a clear bullish trend is evident. The pair opened the session at 146.982 and closed higher at 147.311, breaking through several resistance levels along the way.

The MACD (12,26,9) is positioned above the zero line, showing a fresh bullish crossover. In addition, short- to mid-term moving averages (5, 10, and 30) are aligned beneath the price, reinforcing the current upward momentum. The pair is currently trending with a 0.22% gain.

Picture: USDJPY firms above 147.30 as dollar momentum holds, as seen on the VT Markets app.

Earlier this week, BOJ Deputy Governor Shinichi Uchida maintained a cautious outlook, suggesting the central bank is unlikely to tighten policy prematurely given ongoing volatility in global trade.

However, speculation continues to grow that the BOJ may adjust its inflation forecast higher in its forthcoming quarterly economic report – particularly if rising energy and import costs persist, driven by yen weakness.

Cautious forecast

A sustained breakout above the 147.50 resistance level could reinforce bullish momentum, paving the way for a move toward the next key technical zone around 148.20.

This level may serve as a psychological barrier, and a decisive close above it could open the door to further upside in the near term.

However, with the upcoming Bank of Japan policy meeting and evolving inflation dynamics both in Japan and globally, heightened market volatility is expected.

Traders should remain cautious, as any surprise in the BOJ’s tone – particularly a shift toward more hawkish language – could quickly reverse sentiment.

A stronger-than-expected stance on inflation or forward guidance could prompt a corrective pullback, with 146.80 acting as the immediate support area.

Additionally, broader market drivers such as US economic data, Treasury yields, and geopolitical headlines could amplify intraday price swings.

As a result, maintaining a flexible trading strategy and closely monitoring central bank communication will be crucial in the days ahead.

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Dear Client,

As part of our commitment to provide the most reliable service to our clients, there will be maintenance this weekend.

Maintenance Details:

Please note that the following aspects might be affected during the maintenance:
1. During the maintenance hours, the Client Portal and VT Markets App will be unavailable, including managing trades, Deposit/Withdrawal and all the other functions will be limited.

2. The price quote and trading management will be temporarily disabled during the maintenance. You will not be able to open new positions, close open positions, or make any adjustments to the trades.

3. There might be a gap between the original price and the price after maintenance. The gaps between Pending Orders, Stop Loss, and Take Profit will be filled at the market price once the maintenance is completed. It is suggested that you manage the account properly.

The above data is for reference only. Please refer to the MT4 / MT5 / VT App for the specific maintenance completion and marketing opening time.

Thank you for your patience and understanding about this important initiative.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

The euro is treading carefully as traders await key economic data and an ECB policy update. This analysis breaks down the factors shaping sentiment and what to watch next.

Euro eases ahead of key eurozone data and ECB decision

The euro dipped slightly on Wednesday, pulling back from a two-and-a-half-week peak as investors adopted a cautious stance ahead of crucial eurozone economic releases and the upcoming European Central Bank (ECB) policy decision.

EUR/USD slipped 0.1% to $1.1756 after briefly reaching an overnight high of $1.1780, based on LSEG figures.

Market participants are preparing for a series of flash purchasing managers’ index (PMI) reports, with France kicking off at 0715 GMT, followed by Germany at 0730 and the broader euro area at 0800.

Attention will then shift to the ECB, which is set to announce its policy verdict at 1215 GMT.

While the central bank is widely anticipated to leave interest rates unchanged, traders will be closely monitoring its forward guidance – particularly any comments on the euro’s recent gains, which could affect export competitiveness and inflation outlooks.

Adding to the uncertainty, The Wall Street Journal reported ongoing discussions between the EU and US regarding a trade deal that includes a potential 15% tariff reduction.

This development has sparked concerns over renewed transatlantic trade tensions, which could put additional pressure on the single currency.

Technical analysis

EUR/USD maintained a steady climb from its recent low of 1.17037, reaching a session high of 1.17801 before encountering renewed selling interest. However, bullish momentum has started to fade.

Picture: Bullish steam runs out as EURUSD slips below 1.1770, as seen on the VT Markets app.

The MACD histogram is weakening, and a bearish crossover has formed – signalling potential short-term fatigue among buyers.

Additionally, both the 5- and 10-period moving averages are beginning to slope downward.

The pair is currently hovering just above key support at 1.17550. A decisive move below this level could pave the way for a retest of the previous low around 1.1700.

On the upside, buyers would need to reclaim the 1.1780 level with conviction to re-establish upward momentum.

Outlook remains cautious

The euro’s recent rally may struggle to extend further as markets weigh cautious signals from the ECB and uncertainties surrounding global trade relations.

Should the central bank express concern over the currency’s appreciation or remain non-committal about future rate moves, downside risks could come into play.

On the other hand, a hawkish tone from policymakers or stronger-than-expected PMI readings could inject fresh bullish momentum.

Until clearer direction emerges, EUR/USD is likely to consolidate in a tight range between 1.1720 and 1.1780.

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