What Is Accumulation/Distribution Line?
The Accumulation/Distribution (A/D) Line is a cumulative volume-based indicator that assesses whether an asset is being accumulated (bought) or distributed (sold). It measures the relationship between the closing price and the trading range, weighted by volume. If price closes near its high on heavy volume, the A/D Line rises; if it closes near its low, it falls.
How Accumulation/Distribution Line Works
The A/D Line is calculated by multiplying the Money Flow Multiplier [(Close - Low) - (High - Close)] / (High - Low) by the period's volume, then adding the result to the previous period's A/D value. This cumulative approach reveals the underlying buying or selling pressure that may not be visible from price alone.
Why It Matters for Traders
The A/D Line is most valuable for detecting divergences. If price makes new highs while the A/D Line fails to confirm (bearish divergence), it suggests distribution under the surface — smart money selling into strength. This divergence often precedes significant reversals and is a key signal for timing exits.
