Definition

The Accumulation/Distribution Study is a technical analysis tool that seeks to identify trends in buying and selling pressure. By analyzing the relationship between the closing price, high, low, and volume of a security, this study helps determine whether a stock is being "accumulated" (bought) or "distributed" (sold). The A/D line moves up when there's more buying pressure and down when there's more selling pressure.

Suggested Trading Use

Traders can use the Accumulation/Distribution Study to identify potential reversals or confirmations in market trends. For example, if the A/D line is rising while the price of the stock is falling, it could signal that buyers are stepping in, and a reversal to the upside may be imminent. Conversely, a falling A/D line with rising prices could suggest that sellers are starting to dominate, and a downtrend may be approaching. Combining the A/D Study with other indicators can provide more nuanced insights into market dynamics.