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Key Takeaways
- The Accumulation/Distribution Line is a running cumulative total of money flow volume, where each period contributes its volume scaled by a close location value between −1 and +1.
- For a bar with a positive high-low range, the close location value is ((Close - Low) − (High - Close)) / (High - Low), so a close at the high contributes the full volume positively and a close at the low contributes it negatively.
- Marc Chaikin built the indicator on the premise that a close near the high of a range indicates accumulation and a close near the low indicates distribution.
- Read the line by its change between two bars. That change is the close-location-weighted volume traded in between, whatever level the line started from.
- The line evaluates each period only against its own range and never sees the change from one period to the next, so a stock can gap down hard and still push the A/D line higher.
- Chaikin Money Flow applies the same per-bar arithmetic but normalizes it over a fixed lookback, which makes it bounded while the A/D Line stays cumulative and unbounded.
What is the Accumulation/
The Accumulation/Distribution Line is a cumulative volume indicator developed by Marc Chaikin. It multiplies each bar’s volume by the position of its close inside that bar’s range, then adds the result to a running total. In a bar with a positive range, a close at the high contributes the full volume positively, a close at the low contributes it negatively and a close at the midpoint contributes zero.
Marc Chaikin’s indicator uses a continuous close-location scale. He read a close near the high as accumulation and a close near the low as distribution, which gives the line its name.
How is the Accumulation/
Close Location Value = (2 × close − high − low) / (high − low). For a valid positive-range bar, CLV runs from −1 to +1.
Money flow volume = CLV × volume. A/D = prior A/D + money flow volume. A bar with no range adds zero.
The result reads in weighted shares or contracts, the units of the volume feed.
Changing A/D’s seed shifts the entire line by a constant and leaves every difference and relative peak unchanged. Read the line by its change: from bar 1 to bar 6 it gains 1,720,000 weighted shares.
Formula
Close Location Value = ((Close − Low) − (High − Close)) / (High − Low); Money Flow Volume = Close Location Value × Volume; A/D Line = prior A/D Line + Money Flow Volume- High, Low, and Close are the values of a single bar, and Volume is that bar traded volume.
- For a bar with a positive range, the close location value is +1 when the bar closes exactly at its high, −1 when it closes exactly at its low, and zero at the midpoint of the range.
- Money flow volume is counted in shares or contracts, so the A/D Line reads in weighted shares.
- A bar with no range, where high equals low, adds zero to the line.
- The seed sets the vertical starting level. Differences, slopes and relative peaks over identical observations remain unchanged when only the seed changes.
A/
Calculate six daily bars from an A/D seed of zero. Bars 3, 5 and 6 trade entirely below the prior close and each finishes in the upper part of its own range. The formula uses each bar’s high, low, close and volume.
- Bar 1: high 50.00, low 48.00, close 49.60, volume 1,000,000. CLV = ((49.60 − 48.00) − (50.00 − 49.60)) / 2.00 = +0.60, money flow volume = +600,000, A/D = +600,000
- Bar 2: high 51.00, low 49.00, close 49.40, volume 1,200,000. CLV = ((49.40 − 49.00) − (51.00 − 49.40)) / 2.00 = −0.60, money flow volume = −720,000, A/D = −120,000
- Bar 3 gaps down, with its whole range below the prior close of 49.40: high 47.00, low 45.00, close 46.80, volume 1,500,000. CLV = ((46.80 − 45.00) − (47.00 − 46.80)) / 2.00 = +0.80, money flow volume = +1,200,000, A/D = +1,080,000
- Bar 4: high 48.00, low 46.50, close 46.80, volume 900,000. CLV = ((46.80 − 46.50) − (48.00 − 46.80)) / 1.50 = −0.60, money flow volume = −540,000, A/D = +540,000
- Bar 5 gaps down, with its whole range below the prior close of 46.80: high 45.50, low 44.00, close 45.20, volume 1,100,000. CLV = ((45.20 − 44.00) − (45.50 − 45.20)) / 1.50 = +0.60, money flow volume = +660,000, A/D = +1,200,000
- Bar 6 gaps down, with its whole range below the prior close of 45.20: high 44.00, low 42.50, close 43.85, volume 1,400,000. CLV = ((43.85 − 42.50) − (44.00 − 43.85)) / 1.50 = +0.80, money flow volume = +1,120,000, A/D = +2,320,000
Price falls $5.75 from $49.60 to $43.85, or 11.59%. The A/D Line rises by 1.72M weighted shares from 0.60M after bar 1 to 2.32M after bar 6. Bars 3, 5 and 6 contribute positive weighted volume because their closes sit at 90%, 80% and 90% of their own ranges.
Price moves from $49.60 to $43.85, a decline of $5.75 or 11.59%. Over those same endpoints, A/D rises from 600,000 to 2,320,000, an increase of 1,720,000 weighted shares.
Bars 3, 5 and 6 trade below their respective previous closes but settle in the upper parts of their own ranges. That combination explains the positive A/D contributions alongside lower prices.
A/
OBV uses close-to-close direction to sign the full bar volume. A/D uses the close’s location within the current high-low range.
Chaikin Money Flow sums the same weighted-volume contributions over a rolling window, then divides by the window’s total volume. A/D retains a cumulative total from its selected start.
How traders use the A/
Select two price swings and compare A/D at those same bars. Use that agreement or divergence with a separately defined price trigger, entry, invalidation, size and exit.
Read Relative Volume for activity against a baseline and Volume Profile for volume by price. Each measure supplies a different part of the price-and-volume setup.
If price falls while the A/D Line rises, Options Flow shows whether calls in the underlying are drawing premium at the ask, and the Options Profit Calculator prices each structure for a rebound to your target.
Limitations of the Accumulation/
- Check the close-to-close move beside the line. Each bar scores only against its own range, so bars 3, 5 and 6 gap lower and still push the line higher while price falls $5.75.
- Compare changes over the same bars. The level carries the seed and the start date; the change carries the signal, such as the 1,720,000-share gain from bar 1 to bar 6.
- A rising line reads closing strength. Bar 3 settles at 90% of its range and scores +0.80 on 1,500,000 shares, so confirm that strength with price before calling it accumulation.
- Match the volume feed, the session and the zero-range rule before comparing two A/D charts; each one changes the line.
- Divergence sets up the trade and price triggers it. When the line and price disagree for many bars, the trade stays flat until price breaks the level that confirms the turn.
Bottom line
The Accumulation/Distribution Line weights each bar’s volume by where the bar closes inside its range and keeps a running total. Read its change between two price swings rather than its level, and act on agreement or divergence only with a separately defined price trigger, stop and exit.
Clear answers
Frequently Asked Questions
Sources and Further Reading
- Fidelity Learning Center: Accumulation Distribution
- thinkorswim Learning Center: Accumulation/Distribution Line (AccDist)
- Fidelity Learning Center: What Is The Chaikin Money Flow?
- Fidelity Learning Center: On-Balance Volume (OBV)
How entries are sourced, calculated and updated: editorial methodology.