Accumulation / Distribution Index

Accumulation/distribution index

Accumulation/Distribution index is a technical analysis indicator created by Marc Chaikin. It’s a cumulative total volume, adding or subtracting each day’s volume in proportion to where the close is between the day’s high and low.

First a close location value is formed,

This ranges from -1 when the close is the low of the day, to +1 when it’s the high. For instance if the close is 3/4 the way up the range then CLV is +0.5. The accumulation/distribution index adds up volume multiplied by the CLV factor, ie.

The starting point for the acc/dist total, ie. the zero point, is arbitrary, only the shape of the resulting indicator is used, not the actual level of the total.

The name accumulation/distribution comes from the idea that during accumulation buyers are in control and the price will be bid up through the day, or will make a recovery if sold down, in either case more often finishing near the day’s high than the low. Vice versa for distribution.

The accumulation/distribution index is similar to on balance volume, but acc/dist is based on the close within the day’s range, instead of close-to-close up or down which the latter uses.

Chaikin oscillator

A Chaikin oscillator is formed by subtracting a 10-day exponential moving average from a 3-day moving average of the accumulation/distribution index. Being an indicator of an indicator, it can give various sell or buy signals, depending on the context and other indicators.

Copyright (c)  2006  TradingStocks.NET Permission is granted to copy, distribute and/or modify this document under the terms of the GNU Free Documentation License, Version 1.2 or any later version published by the Free Software Foundation; with no Invariant Sections, no Front-Cover Texts, and no Back-Cover Texts. A copy of the license is included in the section entitled “GNU Free Documentation License”.

An affiliate of elliotwave.com – Investing and Trading in the Stock Market