The Accumulation/Distribution (A/D) Indicator is a go-to tool in technical analysis for tracking money flow in and out of security—whether that’s a stock, commodity, or anything else that trades. 

How it works

It works cumulatively, adding or subtracting a portion of the trading volume to a running total based on how the closing price compares to the overall trading range for a given period. 

At its core, the A/D indicator helps answer a key question: Is this security being accumulated (bought up) or distributed (sold off)? That insight can be crucial for traders trying to gauge the real strength behind a price trend.

Why the accumulation/distribution indicator matters

What makes the A/D indicator so useful is its ability to expose the underlying supply and demand dynamics that aren’t always obvious from price action alone. 

Tracking volume flow can signal when a trend might be losing steam or confirm that momentum is still strong. 

For example, if a stock’s price is climbing but the A/D line is dropping, that’s a red flag—buyers might not be as committed as the price suggests, making a reversal more likely. On the flip side, if prices are falling while the A/D line rises, it could mean selling pressure is drying up and a rebound might be around the corner.

Another big advantage of the A/D indicator is its ability to spot divergences when price and indicator trends don’t quite match up. 

A bullish divergence happens when the price hits new lows, but the A/D line is forming higher lows, hinting that accumulation is quietly happening and a price jump could follow. 

A bearish divergence is the opposite: prices make new highs, but the A/D line trends lower, suggesting distribution is taking place and a drop may be ahead.

Ultimately, the A/D Indicator is a valuable tool for traders and investors looking to confirm trends, anticipate reversals, and get a better read on market sentiment. But like any technical indicator, it’s not a crystal ball—it works best when combined with other analysis techniques and used as part of a well-rounded trading strategy.