Accumulation/Distribution

The Accumulation/Distribution is a momentum indicator that links changes in price and volume. The indicator is based on the idea that the more volume that goes with a price move, the more significant the price movement will be.

When the indicator moves upwards, it suggests that the instrument is being bought (accumulated), as most of the volume is associated with upward price movement. When the indicator moves down, it suggests that the instrument is being sold (distributed), as most of the volume is associated with downward price movement.

Divergences between the Accumulation/Distribution and the security's price imply a change is soon to happen. When a divergence does occur, prices usually change to confirm the Accumulation/Distribution. For example, if the indicator is moving up and the security's price is going down, prices will probably reverse.


Calculation

=(Closing Price – Lowest Price) - (Highest Price – Closing Price)
(Highest Price – Lowest Price)
x Period’s Volume

> 1 = high
< 1 = Low

The calculation should be performed for many days, and then the trend over the days should be compared. For example, if there have been many days with high volume in a downtrend then it suggest that the demand is starting to increase and hence an upward trend to come.