Accumulation/Distribution Indicator
The accumulation/distribution indicator shows how much demand and supply there is for a stock/asset/cryptocurrency by multiplying the closing price of a specific period with volume.
What Is Accumulation/Distribution Indicator?
The Accumulation/Distribution Indicator (A/D) is a technical analysis tool used to measure the supply and demand of a security. It is based on the theory that the more a security is bought and sold, the higher its price will go. The A/D indicator attempts to measure this buying and selling pressure by looking at the number of shares traded and the price of the security over a certain period of time.
The A/D indicator is calculated by taking the closing price of a security and subtracting the low of the day. This value is then divided by the range (high minus low) of the day. This number is then multiplied by the volume of the day. This value is then added or subtracted from a cumulative total.
A positive value indicates that the security is being accumulated, while a negative value indicates that the security is being distributed. This can help traders identify when a trend is likely to continue or reverse.
The A/D indicator is often used in conjunction with other technical indicators to confirm the trend. For example, if the A/D indicator is showing a strong accumulation signal, but the Moving Average Convergence/Divergence (MACD) is showing a bearish crossover, then this could signal the start of a reversal.
The A/D indicator is also useful for identifying divergences. This occurs when the A/D indicator and the price of the security are moving in opposite directions. This could indicate that the security is about to reverse direction.
In addition to being used in technical analysis, the A/D indicator can also be used to measure the relative performance of stocks within a sector. This can help investors identify which stocks are outperforming the sector and which stocks are lagging.
The A/D indicator is a valuable tool for traders and investors who are looking to identify buying and selling pressure in the market. By looking at the number of shares traded and the price of the security over a certain period of time, traders and investors can identify when a trend is likely to continue or reverse. The A/D indicator can also be used to identify divergences and measure the relative performance of stocks in a sector.