DEFINITION of 'Accumulation/Distribution'

An indicator that tracks the relationship between volume and price. It is often considered a leading indicator because it shows when a stock is being accumulated or distributed, foreshadowing major price moves.

When the Accumulation/Distribution line is moving in the same direction as the price trend, it confirms the trend. When the Accumulation/Distribution line is moving in the opposite direction of the price trend, it indicates the price trend may not be sustainable.

The indicator has a three step calculation:

  1. Money Flow Multiplier = [(close  -  low) - (high - close)] /(high - low) 
  2. Money Flow Volume = Money Flow Multiplier x volume for the period
  3. Accumulation/Distribution= previous Accumulation/Distribution + current period's Money Flow Volume

BREAKING DOWN 'Accumulation/Distribution'

The indicator is primarily used to confirm price trends, or spot potential trend changes in price based on divergence with the Accumulation/Distribution line. 

The indicator is primarily used to confirm price trends, or spot potential trend changes in price based on divergence with the Accumulation/Distribution line.

The indicator looks at each period individually, and whether the price closes in the upper or lower portion of the period's (day's) range. This means not all divergences will result in a price trend reversal. Occasionally anomalies will occur where the price is trending lower (higher) but the indicator is rising (falling), because even though the price trend is down, each day the price is finishing in the upper portion of its daily range. High volume days can accentuate this characteristic. 

Therefore, the indicator is different from other cumulative volume indicators, such as On-Balance Volume (OBV). 

  1. Valium Picnic

    A market holiday or a slow trading day.
  2. Fintech

    Fintech is a portmanteau of financial technology that describes ...
  3. Indicator

    Indicators are statistics used to measure current conditions ...
  4. Intraday Momentum Index (IMI)

    A technical indicator that combines aspects of candlestick analysis ...
  5. Money Flow Index - MFI

    A momentum indicator that uses a stock’s price and volume to ...
  6. Mass Index

    A form of technical analysis that looks at the range between ...
Related Articles
  1. Active Trading Fundamentals

    Confirming Price Movements With Volume Oscillators

    Use this indicator to validate a change in price direction and moving averages.
  2. Active Trading Fundamentals

    How Market Psychology Drives Technical Indicators

    The tenets of market psychology underlie each and every charting tool.
  3. Technical Indicators

    Using Technical Indicators To Develop Trading Strategies

    Unfortunately, there is no perfect investment strategy that will guarantee success, but you can find the indicators and strategies that will work best for your position.
  4. Active Trading

    An Introduction To Oscillators

    Find out how this indicator may help improve the average investor's entry and exit points.
  5. Insurance

    Exploring Oscillators and Indicators

    Find out how to use these technical analysis building blocks.
  6. Active Trading

    Candlesticks And Oscillators For Successful Swing Trades

    Take advantage of short-term price moves by pinpointing reversals.
  7. Chart Advisor

    Stocks at Important Technical Levels

    These stocks are breaking or holding at key support and resistance levels. How they react here impacts the direction of the price over the coming months.
  8. Technical Indicators

    Explaining Autocorrelation

    Autocorrelation is the measure of an internal correlation with a given time series.
  9. Chart Advisor

    ChartAdvisor for October 9 2015

    Weekly technical summary of the major U.S. indexes.
  10. Chart Advisor

    These Oil & Gas Stocks Have Reversed

    It's been a long downtrend for oil stock owners, but there's hope. These four oil and gas stocks have reversed and may keep trending to the upside.
  1. What is a common strategy traders implement when using the Money Flow indicator?

    A common strategy stock traders implement with the money flow indicator is to enter or exit trades according to the overbought ... Read Full Answer >>
  2. What are some of the most common technical indicators that back up Doji patterns?

    The doji candlestick is important enough that Steve Nison devotes an entire chapter to it in his definitive work on candlestick ... Read Full Answer >>
  3. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
  4. Point and Figure Charting Using Count Analysis

    Count analysis is a means of interpreting point and figure charts to measure vertical price movements. Technical analysts ... Read Full Answer >>
  5. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  6. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!