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Accumulation/Distribution A momentum indicator which tries to gauge supply and demand by discovering if investors are generally “Accumulating” (buying) or “Distributing” (Selling) a certain stock by identifying divergences between stock price and volume flow. It is calculated using the following formula: Acc/Dist = ((Close – Low) – (High – Close)) / (High – Low) * Period's volume
For example, many up days occuring with high volume in a down trend could signal that the demand for the underlying is starting to increase. In practice this indicator is used to find situations where the indicator is heading in the opposite directions than the price. Once this divergence has been identified the trader will wait to confirm the reversal and make their transaction decisions using other technical indicators. |