The Accumulation Distribution Line is a technical analysis indicator used to measure the flow of money in and out of a security over a specific period of time. It calculates this by analyzing the relationship between the security's closing price and its trading volume utilizing a cumulative distribution function.
The indicator is designed to help investors identify trends and potential reversals in market or security prices. When the Acc/Dist line trends upward or becomes more positive, it indicates that there is a higher volume of buying activity than selling activity. Conversely, when the line trends downward or becomes more negative, it indicates a higher volume of selling activity than buying activity.
The formula for calculating the Accumulation Distribution Line is as follows:
Where: - Close: The closing price of the current period - Low: The lowest price of the current period - High: The highest price of the current period - Volume: The trading volume of the current period
The resulting calculation is then added to the previous period's Accumulation Distribution Line value, creating a cumulative total. This creates a trendline that can be used to gain insight into the balance of buying and selling activity and assess the overall strength of a security's trend.
Overall, the Accumulation Distribution Line is a useful tool for technical analists in determining the buying and selling pressures of a given stock, as well as in forecasting future market trends.
Accumulation Distribution Line
Technical Indicator
The Accumulation Distribution Line is a technical analysis indicator used to measure the flow of money in and out of a security over a specific period of time. It calculates this by analyzing the relationship between the security's closing price and its trading volume utilizing a cumulative distribution function.
The indicator is designed to help investors identify trends and potential reversals in market or security prices. When the Acc/Dist line trends upward or becomes more positive, it indicates that there is a higher volume of buying activity than selling activity. Conversely, when the line trends downward or becomes more negative, it indicates a higher volume of selling activity than buying activity.
The formula for calculating the Accumulation Distribution Line is as follows:
Where: - Close: The closing price of the current period - Low: The lowest price of the current period - High: The highest price of the current period - Volume: The trading volume of the current period
The resulting calculation is then added to the previous period's Accumulation Distribution Line value, creating a cumulative total. This creates a trendline that can be used to gain insight into the balance of buying and selling activity and assess the overall strength of a security's trend.
Overall, the Accumulation Distribution Line is a useful tool for technical analists in determining the buying and selling pressures of a given stock, as well as in forecasting future market trends.