Accumulation and Distribution Line

Though candlesticks are my main ingredient to trade a stock as everyone can observe from the pattern, other parameters are like side dish to do a better confirmation or to preempt what are the status like for that particular stock.

So today, I am going to explain on Accumulation and Distribution Line. What is this parameter about?
This is volume-based indicator to measure the cumulative flow of money out of a stock.

The relationship is closed to the HIGH-LOW range price of the day of a particular stock and based on the volume to check where is the stock heading to.

Example, we will take Capitaland High on 3.07 and Low of 2.97 based on yesterday's close of 2.99.

Thus,

HIGH - 3.07

CLOSE - 2.99

LOW - 2.97

So 2.97 is being categorized as (-1.00) to 3.07 categorized as (+1.00) .
2.99 is (-0.80)

2.97 ----------------------------------------------------------> 3.07
-1.00                                    0                                       +1.00
                                       (half, 3.02)

And now, the close is at 2.99. It is near to lower negative (-1.00)  thus 2.99 (-0.80) x Volume to form the Accumulation and Distribution Line. 

The multiplier is POSITIVE when the close is in the upper half of the HIGH-LOW range , and NEGATIVE when in the lower half. FOR This case, lower half is from 2.97 to 3.02. Upper half is from 3.02 to 3.07.

Buying pressure is strong than selling pressure when it close in the upper half , for example and vice versa.

So the line rises when the multiplier is positive and falls when the multiplier is negative.

Now, does this means that it is indication of buying/selling pressure? Not exactly..As one's got to look at the candlesticks pattern as well as in are they closing lower and lower? higher or higher..

It is a combination of more than one parameter , Accumulation and Distribution Line can't standalone.

Happy Weekend..

Star-Trader