Accumulation / Distribution Line

AMDM: Accumulation MarkUP Distribution MarkDOwn
asr: I call it as AMDM ( see more my blog posts on VSA )
- for OIL we need to Record these phases as one of AMDM ( on any given day one of these 4 letters..) then track this as indicator and back test it.
- in case of OIL , Accumulation look as CONSOLIdatation at lower prices for 2-3 days then Markup Strats.
- consolidation is explained nicely in the charts below with AD line , it happens over months . aslo imp to note are positive/negative divergence of AD line with stock price

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There are many indicators available to measure volume and the flow of money for a particular stock, index or security. One of the most popular volume indicators over the years has been the Accumulation/Distribution Line. The basic premise behind volume indicators, including the Accumulation/Distribution Line, is that volume precedes price. Volume reflects the amount of shares traded in a particular stock, and is a direct reflection of the money flowing into and out of a stock. Many times before a stock advances, there will be period of increased volume just prior to the move. Most volume or money flow indicators are designed to identify early increases in positive or negative volume flow to gain an edge before the price moves. (Note: the terms "money flow" and "volume flow" are essentially interchangeable.)


Another means of using the Accumulation/Distribution Line is to confirm the strength or sustainability behind an advance. In a healthy advance, the Accumulation/Distribution Line should keep up or, at the very least, move in an uptrend. If the stock is moving up at a rapid clip, but the Accumulation/Distribution Line has trouble making higher highs or trades sideways, it should serve as an indication that buying pressure is relatively weak.

Conclusions

The Accumulation/Distribution Line is good means to measure the volume force behind a move.

1.
As a volume indicator, the Accumulation/Distribution Line will help to determine if the volume in a security is increasing on the advances or declines.
2.
The Accumulation/Distribution Line can be used to gauge the general flow of money. An uptrend indicates that buying pressure is prevailing, and a downtrend indicates that selling pressure is prevailing.
3.
The Accumulation/Distribution Line can be used to spot divergences, both positive and negative.
4.
The Accumulation/Distribution Line can be used to confirm the strength and sustainability behind a move.

There are some drawbacks to the Accumulation/Distribution Line, though.

3.
It sometimes difficult to detect subtle changes in volume flows. The rate of change in a downtrend could be slowing, but it may be impossible to detect until the Accumulation/Distribution Line turns up. This drawback has been addressed in the form of the Chaikin Oscillator or Chaikin Money Flow, which are next in the education series.