Accumulation Distribution Definition:
A supply and demand gauge that uses momentum to determine whether investors are "accumulating" (buying) or "distributing" (selling) a security.
This indicator is used mainly to identify divergences between a price and the volume flow. For example, several bullish bars with high volume in a defined downtrend could signal that the demand for the security is increasing.
This indicator is often used to indentify moments when the indicator is heading in the opposite direction of price. Traders search out these divergences to add to a confluence of either buy or sell signals.
Some of the best Accumulation/Distribution signals occur when the price and volume of the chart being analyzed has also set up a bullish or bearish pattern. Using the Accumulation/Distribution for additional confirmation of what has already been "read" in the chart can be a powerful addition to the assessment tools used by a technical analyst.