InvestorQ : I keep reading about this Accumulation Distribution (AD) in technical analysis. What exactly is that and how to interpret the same and apply to trading?

I keep reading about this Accumulation Distribution (AD) in technical analysis. What exactly is that and how to interpret the same and apply to trading?

The Accumulation Distribution (AD) is a good signal of the underlying strength or weakness of the market and is calculated by calculating the proximity of the closing price of the stock or the index to the highs / lows of the day. This exercise is repeated each day for a long period of time for the measure to be really credible. Accumulation Distribution (AD) looks at the proximity of closing prices to their highs or lows to determine if accumulation or distribution is occurring in the market. Price alone can be quite a misleading factor and can easily get skewed by high prices or low prices. Hence the volume aspect is also added to the AD calculation to make it more reliable. The proximity value is multiplied by volume to give more weight to moves with higher volume that to moves with lower volumes as low volume moves can be quite deceptive or managed at times.

Riya Dwivedianswered.The Accumulation Distribution (AD) is a good signal of the underlying strength or weakness of the market and is calculated by calculating the proximity of the closing price of the stock or the index to the highs / lows of the day. This exercise is repeated each day for a long period of time for the measure to be really credible. Accumulation Distribution (AD) looks at the proximity of closing prices to their highs or lows to determine if accumulation or distribution is occurring in the market. Price alone can be quite a misleading factor and can easily get skewed by high prices or low prices. Hence the volume aspect is also added to the AD calculation to make it more reliable. The proximity value is multiplied by volume to give more weight to moves with higher volume that to moves with lower volumes as low volume moves can be quite deceptive or managed at times.