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,

$CLV={(close-low)-(high-close) \over high-low}$

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

$accdist=accdist_{prev}+volume\times CLV$

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.

References

• StockCharts.com on the Accumulation/Distribution Line