Designed by Marc Chaikin, an accumulation distribution line is a volume-based tool made to estimate the cumulative money flow into and out of safety. Marc referred to the tool as the cumulative flow of money line. As with the cumulative tools, an accumulation distribution line is the running total of every period’s flow of money volume. Initially, a multiplier is estimated based on the relation of the near to high-low range. Secondly, the flow of money multiplier is accumulated by the time’s volume to come up with a flow of money volume. Well, the running sum of the flow of money volume configures the accumulation and distribution line. Traders can make usage of this tool to affirm a safety’s underlying trend or except reversals when the tool diverges from the safe place.
How to interpret the Volume Accumulation technical indicator
The distribution or accumulation line might be utilized as a tool to confirm whether safety is trending. If safety is in an efficient uptrend or downtrend, then the distribution or accumulation likely pursues the way of the rate movements, and thus, confirms the uptrend or downtrend. If the distribution or accumulation line and a safety rate are diverging, then it might be a bearish or bullish signal.
If a security’s rate is in a downtrend while the accumulation or distribution line is the uptrend, the indicator manifests there might be purchasing pressure, and the safety’s price might reverse. Accordingly, the safety might reverse plus trend up. Conversely, if the safety rate is the uptrend while the distribution or accumulation line is in a downtrend, then the tool manifest there might be trading pressure or huge distribution. Indeed, this might cause the safety’s rate to reverse as well as to turn into the downtrend.