What it is
Each candle adds or removes some of its volume from the total depending on where it closed in its range. A close right at the high counts all the volume as buying; a close in the middle counts nothing. Over time the line shows whether volume has mostly arrived on strong closes or weak ones.
It has no settings to tune. The actual number has no meaning on its own; only the direction and the comparison with price matter. On gold and index CFDs it uses tick volume.
How it is calculated
1. Money flow multiplier = ((close minus low) minus (high minus close)) / (high minus low). This runs from -1 (close at the low) to +1 (close at the high). 2. Money flow volume = multiplier x the candle's volume. 3. A/D line = the previous A/D value plus this candle's money flow volume.
How to read it
How to trade it
- 1
On a 1 hour US30 chart, look for price at a fresh low while the A/D line makes a higher low.
- 2
Wait for confirmation: a candle that closes above the high of the low candle.
- 3
Enter long on that close.
- 4
Stop below the new low, for example 60 to 100 points on US30.
- 5
Target the last swing high or 2 times the stop, and keep holding while the A/D line keeps rising.
The divergence buy is cancelled if price closes below the low that formed the divergence, or the A/D line breaks below its own previous low.
WickSpeak plots the A/D line in its own pane and writes a plain-English reading on the live candle: what it is, whether volume is backing buyers or sellers now, how to trade it and what would prove the reading wrong. In Playbook, a condition can check when the A/D line crosses above or below its own average, is above or below its own average, or is rising or falling.
Best markets and timeframes
Strongest on markets with real exchange volume such as stocks and futures. On gold, US30 and forex CFDs it uses tick volume, so it is best used on 1 hour and 4 hour charts for divergences rather than precise signals.
Common mistakes
- Reading the absolute value. The level depends on where the calculation started; only the direction matters.
- Ignoring gaps. A/D only sees each candle's range, so a big gap that closes mid-range adds almost nothing.
- Expecting it to time entries. It shows pressure behind a move, so pair it with a price trigger.
Works well with
Questions traders ask
What does the Accumulation/Distribution line show?
It shows whether volume has mostly come in on candles closing near their highs (buying) or near their lows (selling). A rising line suggests accumulation, a falling one distribution.
What is the difference between A/D and On Balance Volume?
OBV adds all of a candle's volume if it closed up and subtracts it all if it closed down. A/D weights the volume by where the close sits in the candle's range, so it reacts to the quality of each close.
Does the A/D line work on forex?
It works, but forex and CFD brokers supply tick volume rather than traded contracts. Treat it as a guide to activity and use it mainly for divergences.
What is accumulation/distribution divergence?
It is when price and the A/D line disagree, for example price making a new high while the line makes a lower high. It shows the move has less buying behind it.