Accumulation/distribution indicator: Trading indicators for the prepared trader

One of many futures trading tools traders can use to enhance their portfolios, the accumulation/distribution (A/D) indicator is a cumulative indicator. It uses price and volume to determine whether a stock is in accumulation or distribution and shows the user how strong a trend may be.

The A/D indicator accumulates a variation of money flow that employs the relationship of the close price to the high and low prices of a bar to determine if that bar can be considered accumulation or distribution. How much is accumulated or distributed is determined by that bar’s volume. As this is an accumulated measure, the current A/D value for a market will depend on where the data on the chart begins.

The A/D indicator attempts to determine divergences between the price of the stock and the volume flow. The specific value provided by this indicator is less important as the general, overall direction of where it’s headed.

• When both A/D and price are represented by higher peaks and higher troughs, the uptrend is more likely to stay as is.
• When both A/D and price are represented by lower peaks and lower troughs, the downtrend is more likely to stay as is.
• When A/D is climbing during a trade range, accumulation may be occurring and could forewarn an upward breakout.
• When A/D is dropping during a trade range, distribution may be occurring and could forewarn a downward breakout.

The A/D indicator is just one trading indicator popular among futures traders.

 

Try this A/D indicator from the NinjaTrader Ecosystem

 

The Dynamic Accumulation & Distribution Indicator from Quantum Trading plots how many times a price region has been tested graphically and numerically. Levels tested more will appear as deeper lines, and levels tested less will appear as narrower lines, instantly revealing the depth of any accumulation or distribution region.

To learn more about A/D indicators and for full access to a growing library of popular indicators, plus market analyzer and SuperDOM add-ons and more, visit the NinjaTrader Ecosystem’s trading apps and services section.

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