What are some examples of successful trades using the AVL indicator?

The AVL indicator helps traders spot accumulation or distribution in crypto by tracking volume flow, with divergences signaling potential reversals—like when price rises but AVL falls, indicating weak momentum.

Aug 10, 2025 at 04:36 pm

Understanding the AVL Indicator in Cryptocurrency Trading

The AVL indicator, also known as the Accumulation Volume Line, is a technical analysis tool used to measure the flow of volume in relation to price movements. It operates by adding volume on days when the closing price rises and subtracting volume on days when the closing price falls. This cumulative approach helps traders identify whether a cryptocurrency is being accumulated (bought) or distributed (sold). The primary strength of the AVL lies in its ability to confirm trends and detect potential reversals through divergences between price and volume flow. When price moves upward while the AVL fails to reach new highs, it may signal weakening momentum. Conversely, when price drops but the AVL holds or rises, it could suggest underlying buying pressure.

How the AVL Indicator Works in Real Trading Scenarios

To interpret the AVL effectively, traders monitor its trend direction and alignment with price action. For instance, during a sustained bullish trend in Bitcoin (BTC), if the price continues to make higher highs and the AVL mirrors this behavior by also reaching new peaks, it confirms strong buying interest. This alignment increases confidence in holding or entering long positions. In contrast, a bearish divergence occurs when Ethereum (ETH) price climbs to a new high, but the AVL plateaus or declines. This mismatch suggests that volume is not supporting the price rise, potentially indicating an impending correction. Traders often use this signal to tighten stop-loss orders or take partial profits.

The calculation of the AVL is straightforward:

• If today’s close > yesterday’s close, add today’s volume to the previous AVL value.
• If today’s close < yesterday’s close, subtract today’s volume from the previous AVL value.
• If the close is unchanged, the AVL remains the same.

This cumulative total forms a line that overlays or appears beneath the price chart, enabling direct visual comparison.

Case Study: Successful Long Entry on Binance Coin (BNB)

In early 2021, Binance Coin (BNB) exhibited a textbook bullish signal using the AVL indicator. After a prolonged consolidation phase between $25 and $30, BNB began to break upward. However, the most telling signal came when the price surged past $35 on increasing volume, and the AVL confirmed the breakout by reaching new highs. Traders who monitored this alignment recognized strong accumulation and initiated long positions. Over the next six weeks, BNB climbed to over $60. Those who entered near $35 and used the AVL trend as a confirmation filter were able to ride the momentum without being shaken out by minor pullbacks. The key insight was that volume-supported moves tend to have greater sustainability, and the AVL’s steady rise validated institutional or large-scale accumulation.

Identifying Distribution: A Short Signal on Solana (SOL)

A notable example of a successful short setup occurred with Solana (SOL) in late 2022. After a sharp rally from $12 to $22 over three weeks, SOL appeared to be gaining momentum. However, the AVL failed to surpass its previous high, creating a clear bearish divergence. Despite the price making higher highs, the volume behind the moves was diminishing, indicating a lack of conviction among buyers. Traders who recognized this divergence initiated short positions around $21.50 with tight risk management. Within ten days, SOL dropped to $14, offering a substantial profit opportunity. The critical factor was the AVL’s inability to confirm the price advance, which acted as an early warning sign of exhaustion.

Combining AVL with Moving Averages for Precision Entries

Enhancing the AVL’s reliability involves combining it with other technical tools. One effective method is pairing the AVL with a 20-period exponential moving average (EMA) on the daily chart of Cardano (ADA). In mid-2023, ADA began to consolidate after a downtrend. When the price crossed above the 20 EMA and the AVL simultaneously broke out to new highs, it signaled strong accumulation. Traders who waited for both conditions to align entered long positions around $0.28. The subsequent move to $0.42 validated the strategy. This dual confirmation reduces false signals by ensuring that both price momentum and volume support the trade. The synchronization of volume and price trend is essential for high-probability setups.

Using AVL Divergence on Altcoins: The Case of Chainlink (LINK)

Chainlink (LINK) provided a compelling example of reversal prediction using hidden bullish divergence. In early 2023, LINK made a lower low around $6.80, but the AVL formed a higher low, indicating that selling volume was decreasing despite the price drop. This suggested that strong hands were absorbing sell orders. Aggressive traders used this divergence to enter long positions with stop-losses below $6.50. Over the next month, LINK rallied to $9.20. The success stemmed from recognizing that price alone does not tell the full story—volume dynamics revealed hidden strength. This type of divergence is particularly useful in ranging or corrective markets where sentiment is overly bearish.

Frequently Asked Questions

Can the AVL indicator be used on intraday timeframes like 1-hour or 15-minute charts?

Yes, the AVL is effective on shorter timeframes. On a 1-hour chart, for example, day traders monitor AVL breakouts during key news events or exchange listings. A surge in volume aligned with price confirms short-term momentum. However, due to increased noise, it is advisable to combine the AVL with volatility filters like Bollinger Bands or RSI to avoid false signals.

Is the AVL suitable for low-cap altcoins with irregular volume?

While the AVL can be applied, its reliability decreases in low-liquidity altcoins where volume spikes can be erratic. Pump-and-dump schemes often distort the AVL, making divergence signals misleading. It performs best on assets with consistent trading volume, such as major cryptocurrencies like BTC, ETH, or BNB.

How do I adjust the AVL settings for different trading styles?

The standard AVL has no parameters to adjust—it is a cumulative calculation. However, traders can apply a moving average to the AVL line itself to smooth it. For swing traders, a 10-period SMA on the AVL can help identify trend direction. Day traders may prefer the raw line for sensitivity to immediate volume shifts.

Does the AVL work during sideways markets?

In ranging markets, the AVL tends to flatten, reflecting balanced buying and selling. Traders watch for breakouts from this flat zone accompanied by volume expansion. A rising AVL during a sideways phase may indicate stealth accumulation, potentially preceding an upward breakout. Conversely, a declining AVL suggests gradual distribution.