Professional Documents
Culture Documents
Introduction
Developed by Marc Chaikin, the Accumulation Distribution Line is a volume-based indicator
designed to measure the cumulative flow of money into and out of a security. Chaikin
originally referred to the indicator as the Cumulative Money Flow Line. As with cumulative
indicators, the Accumulation Distribution Line is a running total of each period's Money
Flow Volume. First, a multiplier is calculated based on the relationship of the close to the
high-low range. Second, the Money Flow Multiplier is multiplied by the period's volume to
come up with a Money Flow Volume. A running total of the Money Flow Volume forms the
Accumulation Distribution Line.
Accumulation/distribution is a momentum indicator that attempts to gauge supply and
demand by determining whether investors are generally "accumulating," or buying, or
"distributing," or selling, a certain stock by identifying divergences between stock price and
volume flow. The accumulation/distribution is calculated by first calculating the money flow
multiplier, and then multiplying the money flow multiplier by the period's volume.
Find the money flow multiplier by identifying the difference between the closing price and
the low price of the range. Next, calculate the difference between the high price of the range
and the closing price of the range. Then, subtract the difference between the high price of the
range and the closing price from the difference between the closing price and the low price of
the range. Lastly, divide the resulting value by the difference between the high price and the
low price of the range.
After the money flow multiplier is calculated, the money flow volume, or the
accumulation/distribution, is calculated by multiplying the money flow multiplier by the
volume for the period. The accumulation/distribution line is then calculated by summing the
previous period's accumulation/distribution and the current period's money flow volume.
Formula
There are three steps to calculating the Accumulation Distribution Line (ADL). First,
calculate the Money Flow Multiplier. Second, multiply this value by volume to find the
Money Flow Volume. Third, create a running total of Money Flow Volume to form the
Accumulation Distribution Line (ADL).
2. Money Flow Volume = Money Flow Multiplier x Volume for the Period
Introduction
Developed by Gerald Appel in the late seventies, the Moving Average
Convergence/Divergence oscillator (MACD) is one of the simplest and most effective
momentum indicators available. The MACD turns two trend-following indicators, moving
averages, into a momentum oscillator by subtracting the longer moving average from the
shorter moving average. As a result, the MACD offers the best of both worlds: trend
following and momentum. The MACD fluctuates above and below the zero line as the
moving averages converge, cross and diverge. Traders can look for signal line crossovers,
centerline crossovers and divergences to generate signals. Because the MACD is unbounded,
it is not particularly useful for identifying overbought and oversold levels.
Moving average convergence divergence (MACD) is a trend-following momentum indicator
that shows the relationship between two moving averages of prices. The MACD is calculated
by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A
nine-day EMA of the MACD, called the "signal line", is then plotted on top of the MACD,
functioning as a trigger for buy and sell signals.
Formula
Calculation
MACD Line: (12-day EMA - 26-day EMA)
Indicate
Bollinger Band
Developed by John Bollinger, Bollinger Bands are volatility
bands placed above and below a moving average. Volatility is
based on the standard deviation, which changes as volatility
increases and decreases. The bands automatically widen when
volatility increases and narrow when volatility decreases. This
dynamic nature of Bollinger Bands also means they can be
used on different securities with the standard settings. For
signals, Bollinger Bands can be used to identify M-Tops and
W-Bottoms or to determine the strength of the trend.
Formula
* Middle Band = 20-day simple moving average (SMA)
* Upper Band = 20-day SMA + (20-day standard deviation of
price x 2)
* Lower Band = 20-day SMA - (20-day standard deviation of
price x 2)