Accumulation/Distribution

Accumulation/Distribution Technical Indicator

The Accumulation/Distribution Technical Indicator is determined by the changes in price and volume. The volume acts as a weighting coefficient at the change of price – the higher the coefficient (the volume) is, the greater the contribution of the price change (for this period of time) will be in the value of the indicator.

Confirmation of Price Changes

The Accumulation/Distribution indicator is a variant of the commonly used On Balance Volume indicator. Both indicators are used to confirm price changes by measuring the respective volume of sales.

Accumulation and Distribution

When the Accumulation/Distribution indicator grows, it indicates accumulation (buying) of a particular security, as the majority of sales volume is related to an upward trend of prices. Conversely, when the indicator drops, it indicates distribution (selling) of the security, as most of the sales occur during a downward price movement.

Divergences and Price Changes

Divergences between the Accumulation/Distribution indicator and the price of the security signal upcoming price changes. Typically, the price tends to move in the direction in which the indicator moves. For example, if the indicator is growing while the price of the security is dropping, a turnaround in price should be expected.

Calculation of Indicator Value

A certain share of the daily volume is added to or subtracted from the current accumulated value of the indicator. The amount added or subtracted depends on the closing price relative to the maximum and minimum prices of the day. If the closing price is exactly in between the maximum and minimum, the indicator value remains unchanged.