Accumulation/Distribution (A/D)

Accumulation/Distribution (A/D) is a volume-based indicator developed by Marc Chaikin. It is designed to measure the cumulative volume flow or money flow into and out of an instrument.

Formula

There are a few ways to calculate A/D.

1. The classic A/D formula:
   
   <math>A/D_{i} = \dfrac{(Close_{i}-Low_{i})-(High_{i}-Close_{i})}{High_{i}-Low_{i}}\times Volume</math>
   
   
2. There is also another way known as "Classic Incremental". A/D is calculated by the classic formula but the A/D value in the previous period is added to the A/D value in the current period. This way is used in Meta Trader.
   
   <math>A/D_{i} = \dfrac{(Close_{i}-Low_{i})-(High_{i}-Close_{i})}{High_{i}-Low_{i}}\times Volume+A/D_{i-1}</math>
   
   
3. The third way is similar to the previous one, but the difference between close and open prices is used in the numerator. This way is used in TradeStation.
   
   <math>A/D_{i} = \dfrac{Close_{i}-Open_{i}}{High_{i}-Low_{i}}\times Volume+A/D_{i-1}</math>
   
   

where

<math>\operatorname{A/D_{i}}</math> is the value of the A/D indicator in the current period;

<math>\operatorname{A/D_{i-1}}</math> is the value of the A/D indicator in the previous period;

<math>\operatorname{Close_{i}}</math> is the Close price of the current period;

<math>\operatorname{Low_{i}}</math> is the Low price of the current period;

<math>\operatorname{High_{i}}</math> is the High price of the current period;

<math>\operatorname{Open_{i}}</math> is the Open price of the current period;

<math>\operatorname{Volume}</math> is the tick volume.

Marketscope implements all these ways. The Marketscope A/D indicator has the parameter "Calculation Mode". So you can choose which calculation method should be used.

Compare indicators calculated in different ways on the chart below:

Usage

We consider interpretation of A/D which uses incremental calculation (the second and the third methods above) since A/D calculated in this way is the most commonly used.

Divergences

The divergence between A/D and price can be used as a signal to buy or sell.

When the price makes a new Low, and A/D does not fall as low as before, this can be interpreted as a signal to buy.

When the price makes a new High, and A/D does not rise as high as before, this can be interpreted as a signal to sell.

Trend Confirmation

A/D can be used to confirm a price trend:

• Increasing price is usually accompanied by increasing A/D.
• Decreasing price is usually accompanied by decreasing A/D.

See Also

Indicators

• On Balance Volume (OBV)

Articles

• Accumulation/Distribution at StockCharts