The Accumulation/Distribution Line (ADL) is a running total that combines price action with volume to indicate whether money is flowing into or out of a security. The idea is that volume helps confirm how strong a price move is; a close near the high with substantial volume tends to push the line higher, while a close near the low with the same volume can push it lower.
ADL is typically computed as a running total: ADL_t = ADL_{t-1} + Volume_t × Multiplier_t, where Multiplier_t = ((Close_t − Low_t) − (High_t − Close_t)) / (High_t − Low_t). If High_t equals Low_t, the Multiplier_t is treated as 0 to avoid division by zero. The resulting ADL series is then plotted alongside the price chart.
Traders look for agreement or divergence between price direction and ADL movement. If prices rise and ADL also rises, that can indicate that volume supports the price upmove; if prices rise but ADL declines, it may signal weaker participation or distribution. Divergences between ADL and price can prompt closer inspection, often in conjunction with other indicators or chart patterns.
ADL relies on intraday or daily data and can be affected by unusual volume or gaps. Like many indicators, it is most informative when used alongside other tools rather than as a sole signal.
Over several weeks, the ADL line trends higher in tandem with rising prices, suggesting continued inflows; later, a price rise with a flattening or falling ADL may indicate weakening participation.
On-Balance Volume (OBV) · Chaikin A/D Oscillator · Volume · Price-Volume Trend (PVT) · Accumulation/Distribution Index (ADI) · Divergence (technical analysis)