Accumulation / Distribution Indicator
The accumulation/ distribution index (A/ D) is an accretive index that evaluates whether a stock is being acquired or dispersed based on volume and price. The A/ D rate looks for disagreement between the stock price and the volume flow. This offers information on how strong a trend is. However, it indicates that copping or accumulation volume may not be sufficient to maintain the price gain and that a price drop may be on the way If the price is rising but the index is dropping.
The A/ D line illustrates how force and demand influence price.
The accumulation/ distribution index (A/ D) can be calculated as follows:
The first step is to calculate the MF multiplier by recording an asset's closing, high, and low prices.
The Money Flow Multiplier Formula
( Closing Price- Period Low Price)- ( Period High Price- closing Price)/ ( High price of the period-Low price of the period)
Also, using the volume of the ( current) period and the multiplier value determined in the previous step, calculate the money inflow volume.
Money Flow Volume = Period Volume x money Flow Multiplier
Now, add the most recent A/ D value to the money inflow volume.
Former A/ D Money Flow Volume = A/ D ( current)
Repeat the procedure after each period, adding or removing fresh money inflow volume from the last total to get the accumulation/ distribution (A/ D) value.
The multiplier in the calculation indicates how important the purchasing or selling was during a certain period. This is fulfilled by assessing whether the price closed in the upper or lower half of its range. The volume is also multiplied by this. As a result, a significant A/ D jump occurs when a stock closes near the high of the period's range on high volume. Alternately, if the price homestretches at the top of the range but volume is low, or if the volume is large but the price homestretches near the bottom of the range, the A/ D won't change as much.
When the price closes in the lower half of the period's price range, the same considerations apply. The pace by which the A/ D declines is determined by both volume and where the price closes within the period's range.
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