Description
The Accumulation/Distribution study is a technical indicator created by Dominico D'Errico. The main purpose of this indicator is to help identify accumulation and distribution market phases described in Dow theory. As both phases are characterized by price range compression, the indicator compares the current price range with its past values. Two modes of range calculation are available in this study: high-low range and average true range.
The study has two plots: RangeRatio and RangeFactor. RangeRatio is a histogram that displays the ratio of the current range (high-low range or average true range as defined in the input parameters) to a past value of that range, expressed in percent. RangeFactor serves as a reference line; if histogram bars are below this line, range compression may be taking place, in which case the bars are displayed in a different color.
The Accumulation/Distribution strategy uses values of the RangeRatio plot to add simulated buy and sell orders.
Input Parameters
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Parameter |
Description |
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The value that is used as both a period of the range calculation and an offset to collect the past value of the range. |
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Defines the position of the RangeFactor line. If a RangeRatio histogram bar is below this line, range compression is recognized. |
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Defines whether to use the high-low range or the average true range in the calculations. |
Plots
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Plot |
Description |
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The ratio of the current range to its past value, expressed in percent. |
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Reference line for the RangeRatio plot. Histogram bars below this line signal range compression. |
Example*
*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.
Further Reading
1. "Portfolio Strategy Based On Accumulation/Distribution" by Domenico D'Errico. Technical Analysis of Stocks & Commodities, August 2018.
Past performance is no guarantee of future performance.