Accumulation/Distribution (A/D) is a technical indicator used to measure money flow into and out of a financial asset. It was developed by Marc Chaikin and is based on the premise that the volume of trading activity is an essential indicator of the strength of a price trend. The A/D indicator is calculated by taking the current period's closing price and comparing it to the previous period's closing price. If the current closing price exceeds the previous closing price, the volume is added to the A/D indicator. If the current closing price is lower than the previous closing price, the volume is subtracted from the A/D indicator. Traders use the A/D indicator to identify potential changes in market trends and confirm a trend's strength. For example, if the A/D line is rising, it suggests intense buying pressure in the market and that the trend may continue.
Accumulation/Distribution - Technical Analysis from A to Z
The Accumulation/Distribution is a momentum indicator that associates changes in price and volume. The indicator is based
on the premise that the more volume that accompanies a price move, the more significant the price move.
The Accumulation/Distribution is really a variation of the more popular
On Balance Volume indicator.
Both of these indicators attempt to confirm changes in prices by comparing the volume associated with prices.
Accumulation/Distribution - Technical Analysis from A to Z