Accumulation/Distribution

Accumulation/Distribution is a momentum indicator which detects the divergences between market price and tick volume.

Based on that it identifies whether the market participants are mostly "accumulating" (buying) or "distributing" (selling) the given instrument.

 

These divergences indicate that the trend is weakening, and generate the signals to BUY when there is a bullish divergence, and SELL when there is a bearish divergence.

 

The Stop orders for Buy positions should be set below the most recent low, and for the Sell positions – above the latest high.

 

Accumulation/Distribution indicator is calculated by the following formula:
AD = Previous AD + [(Close - Low) - (High - Close)] /(High - Low)* Volume

 

Methods of use:

1.Go long when there is a bullish divergence.
2.Go short when there is a bearish divergence.

 

AD_ind