AccumulationDistribution

Accumulation Distribution is a technical analysis indicator that combines price and volume to assess buying and selling pressure in a security. Developed by Marc Chaikin in the 1980s, it aims to reveal whether a security is being accumulated (bought) or distributed (sold) over time.

Calculation begins with the Money Flow Multiplier: ((Close − Low) − (High − Close)) / (High − Low). This multiplier reflects the position of the close within the daily price range. If High equals Low, the multiplier is typically set to zero to avoid division by zero. The Money Flow Volume is the multiplier multiplied by the trading volume for the period. The Accumulation Distribution Line (A/D line) is the running total of Money Flow Volume, i.e., the previous A/D value plus the current period’s Money Flow Volume.

Interpretation centers on direction and divergences. A rising A/D line suggests that volume is heavier on up days, indicating accumulation and potential bullish pressure. A falling line implies distribution and potential bearish pressure. Traders look for confirmations between the A/D line and price trends and watch for divergences, where price moves in one direction while the A/D line moves opposite, as a possible signal of a forthcoming reversal. The Chaikin Oscillator, the difference between short- and long-term moving averages of the A/D line, is sometimes used to gauge momentum of money flow.

Limitations include sensitivity to large price moves and market noise, especially in choppy markets. As with other indicators, A/D should be used in conjunction with other analysis techniques rather than in isolation.

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