Accumulation/Distribution Line (A/D)
Money Flow Accumulation Indicator
IndicatorVolumeAccumulation
Overview
The Accumulation/Distribution Line measures money flow based on where the closing price lies within the bar's high-low range. When price closes in the upper portion of the range, it represents accumulation (buying pressure). When it closes in the lower portion, it represents distribution (selling pressure). A/D is cumulative, preserving the entire history of money flows.
Formula
Money Flow Multiplier (MFM):
MFM = ((Close - Low) - (High - Close)) / (High - Low)
A/D = Previous A/D + (MFM × Volume)
A/D ranges from -1 to +1 within each bar, determining how much to add or subtract from the cumulative total.
Use Cases
- Accumulation Detection: Rising A/D during consolidation signals institutional accumulation
- Breakout Confirmation: Strong breakouts have rising A/D confirming institutional participation
- Divergence Trading: Price making new highs while A/D falls warns of weakness
- Distribution Phase: Falling A/D indicates institutional selling and potential reversal
Advantages vs Limitations
✓ Advantages
- • Considers close position in range
- • Excellent smart money indicator
- • Good divergence detector
- • Works in all conditions
! Limitations
- • Cumulative - early spikes affect reading
- • Affected by gaps
- • Needs confirmation from price action
Related Indicators
Chaikin Money Flow, OBV, MFI, PVT, Force Index