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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.
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