Accumulation/Distribution

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Accumulation Distribution is a common price and volume indicator. A formula for calculation of Accumulation/Distribution values would be:

(Close – Low) – (High – Close)) / (High – Low)= CLV

CLV x period's volume = Accumulation Distribution

CLV = Close Location Value. CLV defines where the close is in relation to the range.

Volume is "accumulated" when the current session close is higher than the preceding close. Volume is "distributed" when the close is lower than the previous session.

For example: If the CLV=1 then the market closes on it's high. Conversely, if the market closes on it's low, the CLV value will be -1. Once derived, the CLV is multiplied by the volume of instruments traded in a given market. The resultant value is used to chart a line (the Accumulation/Distribution Line) which is used to evaluate trending in a given market. Correlation with a moving average indicates confirmation of a trend while divergence is considered to indicate a weak price movement or potential reversal.

The concept behind Accumulation / Distribution as an analysis tool is generally credited to Marc Chaikin.

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