Accumulation/Distribution (A/D) Indicator Definition

The Accumulation/Distribution indicator tracks whether trading volume aligns with buying (accumulation) or selling (distribution). It adds or subtracts a portion of each period’s volume from a running total, depending on where the closing price falls within that period’s high–low range.

Reading the signal

• Rising A/D line with rising price: Volume supports the advance, indicating steady demand.
• Falling A/D line with falling price: Volume confirms the decline, showing consistent supply.
• Price rises while the A/D line falls: Divergence signals weak underlying demand and warns that the uptrend could fade.
• Price falls while the A/D line rises: Divergence suggests diminishing selling pressure and hints at potential support.

Practical uses

Analysts overlay the A/D line on price charts to validate momentum, locate possible reversals, and gauge market sentiment. The indicator gains reliability when combined with additional tools such as moving averages, relative strength indexes, or support-and-resistance levels.