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accumulation/distribution

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Financial Dictionary

Accumulation/Distribution

A momentum indicator which tries to gauge supply and demand by discovering if investors are generally "Accumulating&#8221 (buying) or "Distributing&#8221 (Selling) a certain stock by identifying divergences between stock price and volume flow. It is calculated using the following formula:

Acc/Dist = ((Close &#8211 Low) &#8211 (High &#8211 Close)) / (High &#8211 Low) * Period's volume

Investopedia Commentary

For example, many up days occuring with high volume in a down trend could signal that the demand for the underlying is starting to increase. In practice this indicator is used to find situations where the indicator is heading in the opposite directions than the price. Once this divergence has been identified the trader will wait to confirm the reversal and make their transaction decisions using other technical indicators.

Related Links

Market Strength Tutorial
Momentum and the Relative Strength Index
The Basics of Money Flow
Market Breadth: A Directory of Internal Indicators
Five Investing Pitfalls To Avoid, According to Investor's Business Daily

See also: Advance/Decline Line, Chaikin Oscillator, Divergence

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