Accumulation/Distribution Line (AD)
A volume-based indicator designed to measure the cumulative flow of money into and out of a security.
Usage
Use to confirm price trends or identify potential reversals through divergences. Rising AD confirms an uptrend; falling AD confirms a downtrend.
Background
Developed by Marc Chaikin, the AD line uses the relationship between price and volume to determine whether a security is being accumulated or distributed. It is calculated by multiplying the Money Flow Multiplier by the period’s volume and adding it to a cumulative total. — StockCharts ChartSchool
Formula
[ \text{MFM} = \frac{(Close - Low) - (High - Close)}{High - Low} \ \text{MFV} = \text{MFM} \times Volume \ AD_t = AD_{t-1} + \text{MFV} ]