William's Accumulation-Distribution
Williams' Accumulation-Distribution tracks the buying
pressure and selling pressure.
Overview
Williams' Accumulation-Distribution (WAD) tracks buying pressure
(accumulation) and selling pressure (distribution) on a security.
- With accumulation, most of the volume is associated with upward
price movement.
- With distribution, most of the volume is associated with downward
price movement.
The pressure is determined by where the close sits within
today's true range.
Interpretation
Williams' AD is a running sum of positive accumulation values
(buying pressure) and negative distribution values (selling pressure).
- If today's close is higher than yesterday's close, WAD is
increased by the distance of the close from today's true low (the lesser of
today's low and yesterday's close).
- If today's close is lower than yesterday's close, WAD is
decreased by the distance of the close from today's true high (the greater
of today's high and yesterday's close).
Signals
Divergence between Williams' AD and the price produces
the signals. As with most indicators, WAD leads the price; or in other words,
when a divergence occurs, the price usually changes accordingly. For example, if
the indicator is moving up and the security's price is going down, prices will
probably reverse (as shown in the example above).
- A buying opportunity is signalled by falling prices and a rising
WAD
- A selling opportunity is signalled by rising prices and a falling
WAD
Further information
Also see Volume Accumulation Oscillator (Chaikin), Price and Volume Trend, and
On-Balance Volume.
