Accumulation
tl;dr
Accumulation is when more investors are buying a stock, causing the price to go up. It’s usually shown by higher trading volume and can signal that the stock might rise further soon.
Definition.
A volume-based indicator that shows the flow of money into and out of a security, helping to determine the strength of a trend. See more on volume accumulation.
Real-World Example.
Think of accumulation like a group of people at a concert. Imagine that as more people arrive, the energy in the crowd starts to build up. In the stock market, accumulation happens when investors are buying more shares of a stock, which causes the price to rise. Just like the crowd getting bigger at the concert, the stock price gets stronger as more people buy in.
For example, if the price of a stock has been going up over several days, and the volume (number of shares traded) is increasing at the same time, that could indicate accumulation. It shows that more investors are jumping in, supporting the price movement.
How to Use Accumulation.
- Look for Increasing Volume: When you see a stock price increasing, check the volume. If the volume is higher than usual, it could be a sign of accumulation.
- Confirm with Indicators: Use indicators like the A/D Line (Accumulation/Distribution Line) to confirm. If the A/D Line is also rising, that means the stock is likely being accumulated by investors.
- Watch for a Price Breakout: Accumulation often happens before a big price move. If you see accumulation happening, it could be a sign that the stock might break out and rise even higher in the near future.
