Accumulation/Distribution

The Accumulation/Distribution line (A/D line) is a cumulative volume indicator developed by Marc Chaikin. Like On-Balance Volume, it keeps a running total of volume to estimate whether money is flowing into or out of an asset. Unlike OBV, it does not assign a whole day's volume to buyers or sellers based only on whether price closed up or down. Instead, it weights volume by where the close falls within the day's range: closes near the high count as accumulation, closes near the low as distribution.

The formula#

Money flow multiplier = ((Close − Low) − (High − Close)) ÷ (High − Low)
Money flow volume = Multiplier × Volume
A/D line = Previous A/D + Money flow volume

The multiplier ranges from +1, when the close is at the high, to minus 1, when the close is at the low. A close exactly in the middle gives zero.

A/D line vs OBV#

The two can disagree. A stock that gaps up and then closes near its low adds to OBV (because the close is above yesterday's) but subtracts from the A/D line (because the close is near the day's low). That difference itself can be informative. See On-Balance Volume (OBV).

Reading the A/D line#

• Rising A/D line: closes tend to be in the upper part of the range on volume, a sign of accumulation.
• Falling A/D line: closes tend to be near the lows, a sign of distribution.
• Price rising, A/D falling: bearish divergence, buyers are not pushing closes to the highs.
• Price falling, A/D rising: bullish divergence, buyers are stepping in within each day despite lower prices.

Divergence is the most common signal, but as with every volume indicator, it is a warning rather than an entry trigger. See Volume Divergence.

Chaikin's related indicators#

Marc Chaikin built several tools on the A/D line:

• Chaikin Oscillator: the difference between a 3 period and a 10 period exponential moving average of the A/D line. It shows momentum of accumulation or distribution; crossings of zero are watched as signals.
• Chaikin Money Flow (CMF): the sum of money flow volume over a period, usually 20 or 21, divided by total volume over that period. Readings above zero suggest buying pressure; below zero, selling pressure.

Using it in practice#

1. Confirm breakouts: a breakout with the A/D line making new highs is stronger.
2. Watch ranges: a rising A/D line while price moves sideways can signal accumulation before an upside breakout, a pattern familiar from the Wyckoff method. See Wyckoff Accumulation and Distribution.
3. Check trends: a trend with a confirming A/D line is healthier than one with a diverging line.

Limitations#

• Ignores gaps, which can hide large moves between sessions.
• Volume data quality matters; less useful for spot forex.
• Can trend for long periods regardless of price, making absolute levels meaningless.

Common mistakes#

• Treating divergence as an immediate reversal signal.
• Comparing A/D values across assets.
• Ignoring days with unusually low ranges, where the multiplier can swing on small price changes.

Frequently asked questions#

What does the Accumulation/Distribution line show?#

Whether volume is associated with closes near the highs (accumulation) or near the lows (distribution), as a running total.

How is the A/D line different from OBV?#

OBV assigns all volume based on whether the close is above or below the previous close; the A/D line weights volume by where the close sits within the period's range.

What is Chaikin Money Flow?#

An indicator that sums money flow volume over a period and divides by total volume, showing whether buying or selling pressure dominated.

Sources#

• Wikipedia, Accumulation/distribution index