Description
Accumulation Distribution is a price and volume indicator. It compares the open and close of the current price bar, with the range of the current price bar, and uses the result to weight the volume of the current price bar. It cumulatively tracks the volume, and displays the result as a single line with values above and below zero. Accumulation Distribution is displayed on its own chart, separate from the price bars, and is the lower section in the chart shown above.
Calculation
- Description: Accumulation Distribution (AD) is a comparison of the price movement and the current range, with the result being used to weight the current volume.
- Calculation:
AD = ((Close - Open) / (High - Low)) * Volume
Trading Use
Accumulation Distribution is usually used as a divergence indicator, with long entries signaled by bullish divergence, and short entries signaled by bearish divergence. Accumulation Distribution can also be used as an exit indicator, by showing the end (or the weakening) of the current trend.
