Accumulation is a market
controlled by buyers, distribution is a market controlled by sellers.
The Williams Accumulation/Distribution indicator is usually
traded on divergences as follows:- Distribution is suggested by
the stock making new highs and yet the A/D indicator is failing
to make a new high, so you therefore sell. Accumulation is suggested
by the stock making new lows and yet the A/D indicator is failing
to make a new low, so you buy. Day trading with this indicator is
impossible due to the timescale needed to acquire the data (daily).
There is no evidence that the indicator works on any shorter timeframe.
To calculate Williams'
Accumulation/Distribution indicator, first work out the True Range
High ("TRH" - the higher of yesterday's close or todays high) and
True Range Low ("TRL" - the lower of yesterdays close or todays
Next, if todays close is greater than yesterdays close, todays A/D
is todays close - TRL. If today's close is less than yesterday's
close, todays A/D is todays close - TRH. If today's close is equal
to yesterday's close, todays A/D is zero.
The Williams' Accumulation/Distribution indicator is then simply
a running total of these daily values, i.e. Williams Accumulation/Distribution
= todays Williams Accumulation/Distribution + yesterdays Williams