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Accumulation/Distribution

The accumulation/distribution line is one of the more popular volume indicators that measures money flows in a security. This indicator attempts to measure the ratio of buying to selling by comparing the price movement of a period to the volume of that period. 

Calculated: 


Acc/Dist = ((Close - Low) - (High - Close)) / (High - Low) * Period\'s Volume 

This is a non-bounded indicator that simply keeps a running sum over the period of the security. Traders look for trends in this indicator to gain insight on the amount of purchasing compared to selling of a security. If a security has an accumulation/distribution line that is trending upward, it is a sign that there is more buying than selling. 


Accumulation Distribution uses volume to confirm price trends or warn of weak movements that could result in a price reversal.
  • Accumulation: Volume is considered to be accumulated when the day's close is higher than the previous day's closing price. Thus the term "accumulation day"
  • Distribution: Volume is distributed when the day's close is lower than the previous day's closing price. Many traders use the term "distribution day"
Therefore, when a day is an accumulation day, the day's volume is added to the previous day's Accumulation Distribution Line. Similarly, when a day is a distribution day, the day's volume is subtracted from the previous day's Accumulation Distribution Line.
The main use of the Accumulation Distribution Line is to detect divergences between the price movement and volume movement. An example of the Accumulation Distribution Line is shown below in the chart of the Nasdaq 100 exchange traded fund QQQQ:
accumulation distribution technical analysis price divergences