Accumulation/Distribution Line (A/D Line)

A running, volume-weighted tally of where price closes within each bar's range — used to study whether buying or selling pressure appears to be building.

What it is

The Accumulation/Distribution Line (A/D Line), developed by Marc Chaikin, is a cumulative volume-based indicator. For each bar it looks at where the close sits inside the high-low range, weights that by volume, and adds the result to a running total. The idea is to gauge whether a market is being "accumulated" (closing in the upper part of its range on volume) or "distributed" (closing in the lower part). It is a study tool for interpreting volume relative to price, not a forecast of future prices. Nothing here is predictive, and trading carries risk of loss.

How it works

The A/D Line is built in three steps. First, the Money Flow Multiplier is calculated for each bar: ((close − low) − (high − close)) / (high − low). This produces a value between −1 and +1 — near +1 when the close is at the high, near −1 when the close is at the low, and near 0 when the close is mid-range. Second, that multiplier is scaled by the bar's volume to get Money Flow Volume. Third, each bar's Money Flow Volume is added to the prior total, forming a cumulative line. Because it is cumulative, the absolute level is arbitrary; what traders study is the direction and shape of the line over time, and how it lines up with price. Note that the multiplier uses only each bar's own high, low, and close, so it ignores the gap between one bar's close and the next bar's open — a known limitation of the formula.

How traders read it

• A rising A/D Line is generally read as net accumulation (closes tending toward the upper end of each range on volume); a falling line is read as net distribution.
• Many traders watch whether the line moves in step with price. When price makes a new high but the A/D Line does not, some traders describe this as bearish divergence; the reverse is described as bullish divergence.
• Because the line is cumulative, its raw value has no fixed scale — traders typically focus on slope and turning points rather than the number itself.
• A flat A/D Line during a clear price move is sometimes read as weak volume conviction behind that move.
• Treat divergences and trends as descriptive context, not as cues to act; the line can diverge for a long time, and any apparent confirmation can fail.

Common settings

The A/D Line has no period or length input — it is purely cumulative and calculated bar by bar from price and volume. Some traders add a moving average of the line (for example a 20-period average) to smooth it and judge its slope, but that average is a personal overlay, not part of the core indicator.

Strengths

• Combines price position within the range and volume into a single, simple-to-read line.
• Useful for studying whether volume appears to support or contradict a price trend.
• Requires no parameters, so there is nothing to over-optimize or curve-fit.
• Widely available and consistently defined across charting platforms.

Pitfalls to watch

• The Money Flow Multiplier uses only the high, low, and close of each bar and ignores gaps between bars, so large overnight or session gaps are not captured.
• On bars where high equals low (no range), the formula divides by zero; charting platforms typically handle this, but be aware the bar contributes no meaningful reading.
• It depends entirely on accurate volume data. On instruments with unreliable or fragmented volume (such as some spot forex feeds), the line can be misleading.
• Divergences are not timing tools — price and the A/D Line can stay out of sync for extended periods without any reversal occurring.
• The cumulative, unbounded nature means the line is not comparable across different instruments, and its level shifts as data history changes, so it should always be read in context.

Pine v6 example

//@version=6
indicator("Accumulation/Distribution Line", overlay = false)

// Built-in cumulative A/D Line
ad = ta.accdist
plot(ad, "A/D Line", color = color.blue)

// Optional smoothing overlay (personal study aid, not part of the core indicator)
adMa = ta.sma(ad, 20)
plot(adMa, "A/D 20 SMA", color = color.orange)

Pro tip: Because the A/D Line is unbounded and cumulative, comparing its raw value between two charts tells you nothing. For a like-for-like read, study the line's slope and its agreement or disagreement with price on the same chart, rather than the level.

Educational only — not financial advice, not a recommendation to trade. No indicator is predictive; trading involves substantial risk of loss.