The Accumulation/Distribution Line (ADL) is important because it shows whether a stock is being accumulated (bought) or distributed (sold). It uses both price and volume to help traders understand the strength behind price moves. This helps identify if a price trend is supported by strong buying or selling pressure.
What is the Accumulation/Distribution Line?
The ADL is a technical indicator that combines price and volume to show the cumulative flow of money into or out of a stock. It helps traders see if the stock is under buying pressure (accumulation) or selling pressure (distribution). It is calculated using the close price, high, low, and volume.
How Does ADL Help Traders?
ADL helps traders confirm price trends by showing if volume supports the price move. If the price rises but ADL falls, it may mean the uptrend is weak and selling is happening behind the scenes. If both price and ADL rise, it shows strong buying pressure. This helps traders decide when to enter or exit trades.
What Are Key Signals from ADL?
Key signals include divergences between ADL and price. If the price goes higher but ADL falls, it may warn of a possible reversal. If ADL is rising while price is flat or falling, it suggests accumulation and a possible upcoming price rise. Traders watch these signals to improve timing.
Why is Volume Important in ADL?
Volume is important because it shows the strength behind price moves. ADL uses volume to tell if price changes are supported by real buying or selling. High volume on up moves means strong demand, while high volume on down moves means strong supply. This makes ADL more reliable than price alone.
Is ADL Useful for Indian Stock Market Traders?
Yes, ADL is useful for Indian traders to understand if big investors are buying or selling stocks. It helps analyze stocks on NSE and BSE by combining price and volume data. Indian traders use ADL to improve entry and exit timing and avoid false breakouts.
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