Category: Advanced Indicator Set 2
Input parameters
Name
|
Setting
|
Default
|
High
|
High time series
|
High
|
Low
|
Low time series
|
Low
|
Close
|
Close time series
|
Close
|
Volume
|
Volume Time Series
|
Volume
|
Fast Period
|
Integer >= 1
|
3
|
Slow Period
|
Integer >= 1
|
10
|
Calculations
A/D Oscillator = ExpMovAverage(AccumDist, Fast Period) - ExpMovAverage(AccumDist, Slow Period),
where:
AccumDist = CumSum{[(Close-Low) – (High-Close)] / [High-Low] * Volume},
and CumSum is the cumulative summation operation.
Discussion
Marc Chaikin developed the Accumulation/Distribution Oscillator (ADO) in the early 1970’s as an extension of Larry Williams’ and Joe Granville’s works on the accumulation/distribution processes. The ADO uses a combination of the closing price and daily price range to characterize the accumulation/distribution process of the stock. The basic idea is that if a stock price closes higher than (High+Low)/2 then the stock is under accumulation, if lower – it is under distribution.
In general, the ADO has high positive values when volume is high while the price is increasing, and high negative values when volume is low while the price is decreasing.
The ADO can be used to generate buy signals when it makes an upturn while in negative territory and the 21-day price moving average is trending up. A sell signal is created when the ADO makes a downturn in positive territory and the 21-day price moving average is trending down.
References
Colby, Robert W. and Meyers, Thomas A. "The Encyclopedia of Technical Market Indicators", Irwin, Burr Ridge, IL, 1988.
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