Accumulation/distribution line
Also known as: A/D indicator
The accumulation/distribution line is an indicator based on volume that tries to show whether a is being bought up, accumulated, or sold off, distributed, by the market as a whole, beyond just looking at whether the price went up or down. It combines each period's price close relative to its high and low range with the for that period, then adds the result to a running cumulative total.
The idea behind it is that not all price moves carry the same conviction. A that closes near the top of its daily range on heavy volume is showing strong buying pressure, even if the closing price only rose slightly, while a closing near the bottom of its range on heavy volume is showing selling pressure even on a flat day. By weighting each day's move by both where it closed within its range and how much volume traded, the line captures buying or selling pressure that a simple price chart can miss.
Chartists mainly use the accumulation/distribution line to spot divergence from price. If a 's price is making new highs but the line is trending down, it can suggest the rally is not backed by real buying volume and may be running out of strength. Conversely, a rising line while price stays flat or falls can suggest quiet accumulation ahead of a possible upward move. Like most indicators based on volume, it works best as a confirming signal alongside rather than as a standalone trading trigger.