Accumulation/Distribution Indicator - AD Indicator

Accumulation/Distribution Definition

Accumulation/Distribution is a volume-based technical analysis indicator designed to reflect cumulative inflows and outflows of money for an asset by comparing close prices with highs and lows and weighting the relation by trading volumes.

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How to Use Accumulation Distribution Indicator

The Accumulation/Distribution line is used for trend confirmation or possible turning points identification purposes.

Trend confirmation:

  • An uptrend in prices is confirmed if A/D line is rising;
  • A downtrend in prices is confirmed if A/D line is falling.

Divergence pattern analysis:

  • Rising A/D line along with decreasing prices indicates the downtrend may be weakening to a bullish reversal;
  • Falling A/D along with rising prices indicates the uptrend may be weakening to a bearish reversal.
Accumulation/Distribution Indicator

Accumulation/Distribution (A/D) Indicator

Accumulation/Distribution Indicator Formula (Calculation)

The Accumulation/Distribution indicator is calculated as the value of the closing position [1;-1] multiplied by the current volume of trades.


A/D(t) = [((C – L) – (H – C)) / (H – L)] x Vol + A/D(t-1),

where:
A/D(t) – current Accumulation/Distribution value;
A/D(t-1) – previous Accumulation/Distribution value;
H – current high;
L – current low;
C – close price;
Vol – volume.

How to use Accumulation/Distribution in trading platform

Use indicators after downloading one of the trading platforms, offered by IFC Markets.