Unknown Indicator

The accumulation distribution (A/D) indicator shows the degree to which equity instruments is accumulated by the market over a given period. It uses the quote sensitivity to the highest or lowest daily price of price to determine if accumulation or reduction is taking place in the market. This value is adjusted by equity instruments trading volume to give more weight to distributions with higher volume over lower volume.
Accumulation distribution indicator can signal that a trend is either nearing completion, at a continuation, or is about to break-outs. The actual value of this indicator is of no significance. What is significant is the change in value of over time. The formula for A/D of a given trading day can be expressed as follow: ((Close - Low) - (High - Close)) / (High - Low) X Volume

Accumulation Distribution In A Nutshell

Accumulation distribution is an indicator and tool that allows you to see when people are accumulating stock, which can help you identify trends such as breakouts out, trends, or high volatility. Identifying trends can certainly give you an edge as a trader or investor.

When you look at a stock and it slowly is rising or even staying steady, and then all of sudden it begins to rise and appreciate to only drop off quickly, this is the work of people accumulating stock and ties to our analysis tool, the accumulation distribution.

Closer Look at Accumulation Distribution

First, let us take a look at the accumulation of stock, which is when the stock may be at a steady price or slightly increasing. This is caused by people buying stock to hold because it appears to be doing well and people see value. Multiply that by millions of investors buying the stock, and price will eventually increase, giving more value to investors.

Secondly, the stock begins to increase and attract more attention, driving the stock price higher. The accumulation phase as this point is over and the stock is beginning to appreciated rapidly as it gains more reactionary investors and traders.

Lastly, price hits a new level and you notice the stock price begins to steady at the new highs and eventually drop off a little. These are three areas that accumulation distribution could help you identify a little more efficiently. When you look back on a chart, it is even easier to identify because you can slowly step back and look, seeing how people invested.

This can help boost your long term trading and investing because you can identify trends and other movements that you may otherwise miss. Moving averages could be a great tool to complement this indicator and data set. Hop on the Internet and find how people use this in their current setup and see if it is something that may fit your current trading situation. Always test on a demo account first because you will not be losing real money at the expense of education. Again, it is important to know when funds, retail investors, and banks are buying up stock slowly and quietly because they may have identified a trend or fundamental movements that you may have missed. If there is a big wave coming, the best thing to do is ride it out.

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Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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