1. This example’s analysis begins on Aug 3rd/4th when a peak is formed on the A/D indicator. Price makes a new high at this point compared to the last week.
   
   
2. The Euro climbs higher during the rest of the week (8/1-8/5). Already there is some distribution as the A/D indicator does not follow to its own, higher level.
   
   
3. The next week, price inches up while A/D heads lower. Selling pressure shown in the highlighted box on the A/D panel does not materialize.
   
   
4. The EUR/USD pair goes up at the end of the week reaching a new peak at 1.2485. This peak is higher than the high price reached on Aug 4th. The A/D indicator sets a high also, but that high is lower than the one on the 4th. Price stalls and reverses. One looking at this development would realize they have some divergence between price and their indicator.
   
   
5. There is some selling in the 4 hour period after the peak (highlighted red candle), as some traders may be acting on this divergence or a piece of pro-US data.
   
   
6. After the weekend, many traders see this divergence and know that a Dollar rally may be very likely. If the new week starts with pro-Dollar fundamental data one needs to be prepared for a significant move. The Dollar rally does occur and traders act for the next week bringing the price of the EUR/USD pair from 1.2485 to 1.2125. This is a move of 360 pips.

It may now be clearer how to use the A/D indicator to help in trading decisions. Divergences in volume from price are key indications that a reversal may be at hand. After seeing these two examples lets finish off with one more bearish divergence. That will make three trading setups in one month using the A/D indicator!