Accumulation/Distribution (A/D)

Accumulation/Distribution (A/D) is a volume and price indicator. Volume is a leading indicator of price action. A/D indicates supply and demand for a currency pair by guaging if traders are buying (accumulating) or selling (distributing). The main use of this type of indicator is to detect divergences between the price movement and volume movement. Long entries are signaled by bullish divergence, and short entries signaled by bearish divergence. Accumulation Distribution can also be used as an exit indicator, by showing the end (or the weakening) of the current trend.

Calculation:
AD = ((Close – Open) / (High – Low)) * Volume

Example Chart:

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Tags: Accumulating, Calculation, Distributing, Divergence, Price Indicator, Supply and Demand, Volume