Accumulation/Distribution Line

The Accumulation/Distribution (A/D) line, developed by Marc Chaikin, is a cumulative volume-based indicator that measures the flow of money into and out of an instrument. It uses the close's position within the high-low range, weighted by volume, to determine whether the instrument is being accumulated (bought) or distributed (sold).

How A/D Is Used in Trading

When the A/D line is rising, it indicates that buying pressure (accumulation) dominates. A close near the high of the bar with heavy volume adds significantly to the A/D line. A rising A/D line alongside rising prices confirms the uptrend has strong participation.

A/D divergence is the most actionable signal. When price makes new highs but the A/D line fails to confirm, it suggests distribution is occurring despite the price increase. This hidden selling pressure often precedes corrections, giving traders an early exit signal.

Unlike OBV which treats every up-close bar equally, A/D weights the volume by where the close falls within the range. A bar closing near its high contributes more than one closing in the middle, making A/D more granular in its assessment of buying and selling pressure.

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