Accumulation/Distribution Line
Measures cumulative money flow using where price closes within its daily range, identifying whether institutions are accumulating or distributing a position.
Description
The Accumulation/Distribution Line was developed by Marc Chaikin as a refinement of On-Balance Volume. Rather than assigning all volume to a single direction based on whether the close was up or down, A/D Line considers where within the period’s range the close fell. Closing near the high signals accumulation (buying pressure); closing near the low signals distribution (selling pressure).
How It Works
Money Flow Multiplier = [(close − low) − (high − close)] / (high − low). This value ranges from −1 (close at low, pure distribution) to +1 (close at high, pure accumulation). Money Flow Volume = Multiplier × period volume. The A/D Line = running cumulative total of Money Flow Volume. Unlike OBV, partial credit is given — a close at the midpoint of the range contributes 0 to the A/D Line regardless of direction.
How to Read It
A rising A/D Line alongside rising price = confirmed uptrend with institutional accumulation. A falling A/D Line alongside rising price = distribution into strength — bearish divergence that often precedes a price decline. The trend of the A/D Line relative to price direction is the primary signal; the absolute level is not meaningful.
Common Uses
- Identifying divergences between price and money flow
- Detecting institutional accumulation before price breakouts
- Confirming distribution during advances that may be near their end
- A more nuanced alternative to OBV for regime analysis
Caveats
A/D Line is heavily influenced by closing position within the range. A stock that consistently closes near the midpoint of its daily range may show flat A/D even during a sustained directional move. Gaps distort the calculation because they affect where the close sits relative to the high-low range. Like OBV, the absolute level is irrelevant — only trends and divergences matter.