Developed by Larry Williams, the Williams' Accumulation/ Distribution indicator is used to determine if the marketplace is controlled by buyers (accumulation) or by sellers (distribution) and trading when there is divergence between price and the A/D indicator. Williams recommends buying when prices fall to a new low yet the A/D indicator fails to reach a new low. Likewise, sell when the price makes a new high and the indicator fails to follow suit.
To calculate the Williams' Accumulation/Distribution indicator, determine:
True Range High (TRH) = Yesterday's close or today's high whichever is greater
True Range Low (TRL) = Yesterday's close or today's low whichever is less
The day's accumulation/distribution is then calculated by comparing today's closing price to yesterday's closing price.
If today's close is greater than yesterday's close: Today's A/D = today's close - TRL
If today's close is less than yesterday's close: Today's A/D = today's close - TRH
If today's close is the same as yesterday's close then the A/D is zero.
The Williams' Accumulation/Distribution indicator is a cumulative total of the daily values:
Williams A/D = Today's A/D + Yesterday's Williams A/D