Accumulation/Distribution AD

Input Information

Name Expression Default Description

Market Synopsis

Table of Contents

Definition of Accumulation/Distribution Indicator

The Accumulation/Distribution Indicator (A/D) is a technical analysis tool used to measure the amount of money flowing into or out of an asset over time. It is a volume-based indicator that takes into account both price and volume data, and it is primarily used to identify trends in buying and selling pressure.

Calculation of Accumulation/Distribution Indicator

The A/D indicator is calculated using the following formula:

A/D = [(Close – Low) – (High – Close)] / (High – Low) x Volume

Where:

  • Close: The closing price of the current period.
  • Low: The low price of the current period.
  • High: The high price of the current period.
  • Volume: The total volume traded during the current period.

Interpretation of Accumulation/Distribution Indicator

The A/D indicator can be interpreted in several ways:

  • If the A/D line is trending upwards, it suggests that there is more buying pressure than selling pressure in the market.
  • If the A/D line is trending downwards, it suggests that there is more selling pressure than buying pressure in the market.
  • If the A/D line is flat or moving sideways, it suggests that the market is balanced and neither buyers nor sellers have a significant advantage.

Uses and Limitations of Accumulation/Distribution Indicator

The A/D indicator can be used in a variety of ways:

  • As a trend-following indicator to identify bullish or bearish trends in the market.
  • As a confirmation tool to confirm other technical indicators such as moving averages or trend lines.
  • As a divergence tool to identify divergences between the A/D indicator and price, which could signal a potential reversal in the market.

However, like all technical analysis tools, the A/D indicator has some limitations:

  • It is based on historical data and cannot predict future market movements with certainty.
  • It may give false signals in choppy or volatile markets.
  • It should be used in conjunction with other technical indicators and market analysis tools for best results.

Plot Information

Number Name Default Color Description

Indicators

Fundamental Summary

    Coming soon!!

Technical Summary

Related Content

course

Momentum Trading Strategies

course

Momentum Tools

course

Trading Strategy : Momentum Trade

course

Tools for trading momentum

course

Introduction to Momentum Trading