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Measuring buying and selling pressure through volume.
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.
Bullish divergence: Price makes lower lows but the A/D line makes higher lows. This signals hidden accumulation — smart money is buying despite falling prices. Often precedes a reversal up.
Bearish divergence: Price makes higher highs but the A/D line makes lower highs. Distribution is occurring under the surface — institutions are selling into the rally.
Trend confirmation: When the A/D line trends in the same direction as price, the trend has volume support and is more likely to continue. A rising A/D line with rising price is the healthiest bullish signal.
This indicator works best when combined with price action analysis. Never trade indicators alone - always confirm with the chart.
Indicators confirm what price action shows. They don't replace it. Never trade based on an indicator signal alone. Always combine with chart structure, pattern recognition, and volume analysis.
The Academy teaches when to use this indicator, when to ignore it, and how to combine it for high-probability setups.
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