Accumulation Distribution Line (ADL)
tl;dr
The A/D Line (Accumulation/Distribution Line) is an indicator that shows if more people are buying or selling a stock. If the line goes up and the price goes up, that’s a good sign. If the line goes down while the price goes up, it’s a warning that the stock could fall 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.
Imagine you’re watching the stock market, and you’re trying to decide whether a stock is going to go up or down. You can use the A/D Line (Accumulation/Distribution Line) to help figure out if more people are buying or selling a particular stock.
Let’s say the stock of a company is rising, but the A/D line is falling. This could mean that even though the stock price is going up, there aren’t many people actually buying. In other words, it’s going up, but only because of a few big trades, not because there’s real interest from the market.
This tells you that the stock might not have much support and could fall soon. On the flip side, if the stock price is rising and the A/D Line is also going up, this could mean that a lot of people are buying and there’s real support for the price increase.
How to Use the A/D Line.
- Check the Stock Chart: Open up a stock chart on your favorite trading platform.
- Look for the A/D Line: Usually, you’ll find it in the list of indicators. If you can’t find it right away, just search for “Accumulation/Distribution” or “A/D Line.”
- Understand the Movement:
- If the A/D line is rising while the stock price is rising, that’s a good sign. It means more buyers are in the market, and the price increase has strong support.
- If the A/D line is falling while the stock price is rising, that’s a bad sign. It means fewer people are buying, so the price might soon drop.
- If the A/D line is falling while the stock price is falling, it could indicate that there’s real selling pressure, and the stock might continue to drop.
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