Description:
Accumulation/Distribution Line is a cumulative volume-based indicator designed to measure the flow of money into and out of an asset, indicating buying or selling pressure. When the Accumulation/Distribution Line moves in conjunction with price, this is considered to be supportive of the trend. It considers the closing price’s location within the day’s range and the volume for the day to determine whether the stock is being accumulated (bought) or distributed (sold). The indicator moves up when the stock closes in the upper half of its daily range with increased volume, suggesting accumulation, and moves down when the stock closes in the lower half with high volume, suggesting distribution.
Input Parameters:
n/a
Use Cases:
- Positive divergence (rising A/D Line and falling price) indicates a potential bullish reversal. In contrast, negative divergence (descending A/D Line and rising price) suggests a possible bearish reversal.
- Combining the A/D Line with other indicators: Use the A/D Line in conjunction with other technical indicators, such as moving averages and Relative Strength Index (RSI), to improve the accuracy of your analysis.
- Identifying entry and exit points: When the A/D Line breaks above or below a trendline or support/resistance level, it can signal a potential entry or exit point.
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