The Accumulation/Distribution Line
stock trading technical indicator
which displays the flow of volume into or out of a stock
, and is used to help make stock buying and selling
(The interpretation of the indicator is similar to the interpretation of On Balance Volume
Another use of the Accumulation/Distribution Line is explained in the description of the Chaikin Oscillator.
The indicator is calculated:
Ii = Ii-1 + Vi * ((Ci - Li) * (Hi - Ci) / (Hi - Li))
Ii is the stocks's Accumulation/Distribution Line for the period i,
Hi is the stocks's high price,
Li is the low,
Ci is the close,
and Vi is the volume.
Ii-1 is the previous period's Accumulation/Distribution Line value.
There are two ways to interpret
1) Assume that stock price peaks are preceeded by increase in the indicator and that the latter stages of a stock price bottom are generally accompanied by a decrease in the indicator.
2) Assumes that an increase in the indicator over a relatively short time period indicates that a price bottom
is near and that a decrease
in the indicator over a longer time period indicates
an approaching peak.