What the A/D indicator measures
The accumulation distribution indicator is a running total that combines where a bar closes inside its range with how much volume traded on that bar. Volume here means the amount of trading activity during the bar.
The idea:
- A close near the bar's high on heavy volume suggests buyers controlled the session. This is called accumulation, and the line rises.
- A close near the low on heavy volume suggests sellers controlled it. This is called distribution, and the line falls.
- A close in the middle of the range adds almost nothing.
The line has no fixed scale. Its absolute level means little. Its direction and slope are what traders watch.
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Formula and settings
The indicator is built in three steps:
- Close Location Value (CLV) = ((Close − Low) − (High − Close)) ÷ (High − Low). It is fully positive when the bar closes at the high, fully negative when it closes at the low, and neutral at the midpoint.
- Money flow volume = CLV × Volume.
- A/D line = the previous A/D value + the current money flow volume.
The indicator has no period setting. It is cumulative from the first bar loaded on the chart, so its starting value depends on how much history your terminal has.
Adding it in MT4 and MT5
- In MetaTrader 4, open Insert → Indicators → Volumes → Accumulation/Distribution. MT4 uses tick volume.
- In MetaTrader 5, the path is the same. MT5 also lets you choose the volume type, either tick or real, if the symbol provides real volume.
In forex there is no central exchange, so platforms show tick volume. Tick volume counts price changes, not traded lots. It often follows real activity, but it is an approximation.
How to use accumulation distribution
In this drawn example, price makes higher highs while the A/D line makes lower highs. This is a divergence: each new price high comes with closes lower in the range or on less volume. It shows that support for the move is weakening. It does not tell you when, or whether, price will turn. See Divergence for how traders confirm such readings.
Common uses:
- Confirmation. If price and the A/D line move in the same direction, the move has volume behind it.
- Divergence. If they disagree, the move may have weaker support than it looks.
- Range context. Some readers combine the line with Wyckoff method ideas about accumulation and distribution phases.
Where it misleads
- Gaps are ignored. CLV uses only the bar's own high, low and close. A large gap up followed by a close near the low counts as distribution, even though price rose sharply.
- Flat bars. When the high equals the low, the formula has no range to divide by. Platforms handle this differently, usually by adding nothing for that bar.
- Tick volume. In forex the line reflects quote activity, not traded size.
- Volume spikes. A single news bar can shift the line for a long time, because the total never resets.
- History dependence. Different start points produce different levels, so compare slopes, not values.
Parameter choices for experienced traders
Because the line has no inputs, traders adjust how they use it:
- Apply a moving average to the A/D line to smooth noise.
- Use Chaikin Money Flow, which sums the same money flow volume over a fixed window and divides by total volume. This removes the history dependence.
- Compare the line with On-Balance Volume, which uses only close-to-close direction, and with the Money Flow Index.
- Check it on multiple timeframes, because a reading on a lower timeframe can disagree with a higher one.
No indicator removes risk. Leveraged forex and CFD trading can lose money fast, so read the risk management guide before acting on any indicator.
Frequent questions
Is the A/D line the same as OBV?
No. OBV adds or subtracts the whole bar's volume based on the close-to-close direction. A/D weights volume by where the close sits inside the bar's range.
Does the A/D indicator have default settings?
It has no period. In MT5, the only choice is the volume type.
Can I use it in forex?
Yes, but it runs on tick volume, so treat it as an approximation of activity.
Why does my A/D value differ from someone else's?
The line is cumulative, so a different amount of loaded history gives a different level. The shape is what matters.
Where can I learn related tools?
Start with Technical analysis and the Volume Indicator guide.