Money Flow Accumulation (A/D)
factor.formula
Money Flow Accumulation (A/D):
The A/D indicator is the cumulative value of daily fund flow, which is calculated by multiplying the relationship between the price range and the closing price by the trading volume.
The calculation of the A/D indicator is based on the following formula:
- :
The cumulative indicator value of capital flow on day t.
- :
The cumulative indicator value of capital flow on the t-1th day, the initial value is usually set to 0.
- :
The trading volume on day t.
- :
Closing price on day t.
- :
The highest price on day t.
- :
The lowest price on day t.
- :
The daily money flow multiplier (Money Flow Multiplier), which fluctuates between -1 and 1, represents the direction and strength of the money flow of the day. When the closing price is close to the highest price of the day, the multiplier is positive and close to 1, indicating that the buyer's power is strong on that day; on the contrary, when the closing price is close to the lowest price of the day, the multiplier is negative and close to -1, indicating that the seller's power is strong on that day. The numerator (2*CLOSE_t - HIGH_t - LOW_t) measures the position of the closing price in the price range of the day, and the denominator (HIGH_t - LOW_t) is the width of the price range of the day. When HIGH_t = LOW_t, in order to avoid division by 0 errors, this value is usually set to 0, and the money flow is also 0 at this time, which has no effect on the A/D indicator.
factor.explanation
The Accumulated Money Flow Index (A/D) measures the flow of funds through daily volume and price changes, thus reflecting the power comparison between buyers and sellers in the market. When the A/D index rises, it indicates that funds are flowing in and buying power is dominant, which may indicate the potential for price increases; when the A/D index falls, it indicates that funds are flowing out and selling power is dominant, which may indicate the risk of price declines. The divergence between the A/D index and the price can be used as an important trading signal reference. For example, when the price hits a new low and the A/D index does not hit a new low (bottom divergence), it may indicate that buying power is accumulating and the price may be about to reverse and rise; conversely, when the price hits a new high and the A/D index does not hit a new high (top divergence), it may indicate that selling power is increasing and the price may be about to reverse and fall. Therefore, the A/D index can not only help identify the strength of the trend, but also discover potential price reversal points. It is a volume-driven, leading indicator.