Traditional Way to Calculate
Shares Accumulation
Larry Williams created a now widely used formula to calculate the accumulation/
distribution (A/D) balance on daily charts. Figure 1.2 shows such
a calculation. The principle is to weight the total volume exchanged during
the day by the price gain/loss, divided by the price spread during that day.
Share accumulation means buying.
Share distribution means selling.
The simple idea behind this is to say that if shares are exchanged during
the day and the closing price is higher than the opening price, for example,
the total result is considered positive: Buyers are stronger than sellers.
This means that on average, there is share accumulation during the day.
However, if the price spread during the day is very large compared to
the gain, it means that traders have been fighting during the day. Therefore,
the strength in accumulation of shares should be proportional to the extent
of the fight.