Accumulation/Distribution
Volume & money flow
Marc Chaikin's A/D line: a cumulative money-flow line that tries to gauge whether large players are quietly buying (accumulating) or selling (distributing).
In its original form this indicator uses volume and/or the daily range (High/Low). The scanner only has closing prices and approximates those inputs (see the note at the bottom). So treat the absolute values as indicative; the direction and the crossings remain usable.
Construction & calculation
- Determine per day the Money Flow Multiplier: where does the price close within the daily range? Near the top = positive, near the bottom = negative.
- Multiply that multiplier by the volume: that is the Money Flow Volume.
- Add that to the previous value each day — the line is thus cumulative.
MFM = ((C - L) - (H - C)) / (H - L)
MFV = MFM x Volume
A/D = A/D(yesterday) + MFV(today)
Interpretation
- The direction of the line matters, not the level. A rising A/D line means net money is flowing in.
- The most powerful use is divergence: if the price sets a new high but the A/D line does not follow, the rally is not backed by real inflow.
- A falling price with a rising A/D line suggests that strong hands are buying up.
How the signal works in this scanner
Buy signal (green)Bullish divergence: over a 20-bar window the price makes a lower low in the last 5 bars than in the 15 bars before, while the A/D line makes a higher low.
Sell signal (red)Bearish divergence: the price sets a higher high, but the A/D line lags with a lower high.
Watch-outs & pitfalls
- The A/D line ignores price gaps between two days. A stock that opens 10% lower and then rises all day gets a positive A/D — which feels counterintuitive.
- Divergences can persist for a long time before the price follows. It is a warning, not a timing signal.