What It Is
The Accumulation/Distribution (A/D) line is a volume-based indicator that measures the cumulative flow of money into and out of an asset. Developed by Marc Chaivin, it uses the relationship between closing price and the high-low range to determine whether volume represents accumulation (buying) or distribution (selling).
Key insight: If price closes in the upper half of its range, that period's volume is considered accumulation. If it closes in the lower half, it's distribution. The A/D line runs a cumulative total of this calculation, creating a running measure of buying vs selling pressure.
Unlike On-Balance Volume which only considers direction, the A/D line weighs where price closes within its range. A candle that closes near its high with heavy volume contributes more to the A/D line than one that barely closes up.
Trading Application
Use the A/D line primarily as a confirmation and divergence tool, not a standalone signal generator. Its greatest value is revealing when price action and volume pressure disagree.
Combine A/D divergences with support/resistance levels and candlestick patterns for highest-probability setups. A bullish divergence at a key support zone is a powerful buy signal.
This indicator works best when combined with price action analysis. Never trade indicators alone - always confirm with the chart.
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Compare this reference with related structures and readings before applying it to a live chart.