Accumulation/Distribution
Accumulation/Distribution Technical Indicator
Section titled “Accumulation/Distribution Technical Indicator”The Accumulation/Distribution Technical Indicator is determined by the changes in price and volume. The volume acts as a weighting coefficient at the change of price – the higher the coefficient (the volume) is, the greater the contribution of the price change (for this period of time) will be in the value of the indicator.
Confirmation of Price Changes
Section titled “Confirmation of Price Changes”The Accumulation/Distribution indicator is a variant of the commonly used On Balance Volume indicator. Both indicators are used to confirm price changes by measuring the respective volume of sales.
Accumulation and Distribution
Section titled “Accumulation and Distribution”When the Accumulation/Distribution indicator grows, it indicates accumulation (buying) of a particular security, as the majority of sales volume is related to an upward trend of prices. Conversely, when the indicator drops, it indicates distribution (selling) of the security, as most of the sales occur during a downward price movement.
Divergences and Price Changes
Section titled “Divergences and Price Changes”Divergences between the Accumulation/Distribution indicator and the price of the security signal upcoming price changes. Typically, the price tends to move in the direction in which the indicator moves. For example, if the indicator is growing while the price of the security is dropping, a turnaround in price should be expected.
Calculation of Accumulation/Distribution
Section titled “Calculation of Accumulation/Distribution”A share of each bar’s volume is added to or subtracted from the accumulated value, depending on where the close lies within the bar’s range. If the close is exactly halfway between the high and the low, the indicator value does not change.
A/D(i) = ((CLOSE - LOW) - (HIGH - CLOSE)) * VOLUME / (HIGH - LOW) + A/D(i - 1)Where:
CLOSE,HIGHandLOWare the close, high and low price of the bar;VOLUMEis the (tick) volume of the bar;A/D(i - 1)is the indicator value of the previous bar.
Because the indicator is a running total, its absolute value depends on how much history is loaded. Compare it with its own earlier values rather than with a fixed number.