The Williams Accumulation/Distribution study is used to determine either the marketplace is controlled by buyers (accumulation) or by sellers (distribution). Its initial value is zero. If the Close price exceeds the Close price one bar ago, a distance between the Close price and the True Range bottom is added to the indicator. If the Close price is less than the Close price one bar ago, a distance between the close and the True Range top is subtracted from the indicator. If the Close price is unchanged, the indicator is unchanged as well.
This study may be analyzed for divergences between the value of the indicator and the price. If the price is making lower lows but the indicator fails to make lower lows, this may be an indication of a bullish reversal. Similarly, if the price is making higher highs but the indicator fails to make higher highs, a bearish reversal might occur.
Plot | Description |
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The Williams Accumulation/Distribution line. | |
Zero level |
*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.
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Williams Accumulation/Distribution (Williams AD) is an indicator that measures market pressure i.e. whether an asset is accumulated (buyers pressure prevails) or distributed (sellers pressure prevails). The indicator may be used for analyzing divergences with price: when the price makes a new low, but the indicator doesn't, the price is likely to turn up, and vice versa.
Williams AD uses True Range High (TRH) and True Range Low (TRL) values during calculation. TRH is the greatest of yesterday's close and today's high, while TRL is the least of yesterday's close and today's low. The indicator compares today's close price to yesterday's close price:
The indicator then calculates a cumulative total of these values and plots a line starting from the zero level.
Today's A/D / today's colse - TRL
Today's A/D / today's close - THR
Today's A/D = 0
Williams AD = Today's A/D + Yesterday's Williams A/D
where:
THR – True Range High
TRL – True Range Low
The plot renders the data you are working with on the chart. You can show/hide a plot by clicking the corresponding item in the settings. Every plot has a set of basic settings that you can change: color, weight, and type.
Plot | Description |
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WAD | The Williams Accumulation/Distribution plot |
Zero | The zero level |
Color |
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Click the color rectangle under the plot's name to open the palette. Use the slider at the bottom to set the opacity of the color. Palette To create a custom color:
The custom-created colors are added to your palette. To remove a custom color, drag it out of the palette. |
Weight |
Change the value (in px) to adjust the thickness of the plot. |
Type |
The following plot types are available:
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Check Overlaying to display the indicator on the chart. Otherwise, the indicator is shown in a study pane down below.
Note: To reset the settings, click Restore to Default next to the SETTINGS: INDICATOR'S TITLE
Overview
Accumulation is a term used to describe a market controlled by buyers; whereas distribution is defined by a market controlled by sellers.
Interpretation
Williams recommends trading this indicator based on divergences:
Distribution of the security is indicated when the security is making a new high and the A/D indicator is failing to make a new high. Sell.
Accumulation of the security is indicated when the security is making a new low and the A/D indicator is failing to make a new low. Buy.
Example
The following chart shows Proctor and Gamble and the Williams' Accumulation/Distribution indicator.
A bearish divergence occurred when the prices were making a new high (point "A2") and the A/D indicator was failing to make a new high (point "A1"). This was the time to sell.
Calculation
To calculate Williams' Accumulation/Distribution indicator, first determine the True Range High ("TRH") and True Range Low ("TRL").
Today's accumulation/distribution is then determined by comparing today's closing price to yesterday's closing price.
If today's close is greater than yesterday's close:
If today's close is less than yesterday's close:
If today's close is equal to yesterday's close:
The Williams' Accumulation/Distribution indicator is a cummulative total of these daily values.
Williams Accumulation Distribution is traded on divergences. When price makes a new high and the indicator fails to exceed its previous high, distribution is taking place. When price makes a new low and the WAD fails to make a new low, accumulation is occurring.
Williams Accumulation Distribution was created by Larry Williams.
Commonwealth Bank of Australia (CBA) is plotted with Williams Accumulation Distribution.
Mouse over chart captions to display trading signals.
See Indicator Panel for directions on how to set up an indicator. Edit Indicator Settings to alter the default settings.
To calculate Williams Accumulation Distribution:
1. Calculate the True Range High and True Range Low:
True Range High is the greater of:
True Range Low is the lesser of:
2. Compare Closing price to yesterday's Closing price:
3. Multiply the price move by volume:
AD [today] = Price Move [today] * Volume [today]
4. Calculate the cumulative total:
Williams AD = AD [today] + Williams AD [yesterday]
Steven Achelis omits step 3. above in his book Technical Analysis A-Z and several other websites/software programs appear to follow this approach. For the benefit of investors accustomed to Achelis' approach, we have provided both versions. Achelis' version is described as Williams Accumulate Distribute.
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