Accumulation Distribution Indicator
It is an indicator used by the technical analyst which uses Volume and Price to assess demand and supply of shares which were traded on stock exchanges.
This indicator helps to identify the variations in the prices of shares based on the volume. ADR identifies the strength of the trend in which prices of the share of a company is going whether in downtrend or uptrend.
For Better Understanding watch on YouTubeHow to Calculate ADR?
Before we understand how to interpret this indicator, we should know how the values of this indicator are derived.
It is actually based on the volume given during the period and a multiplier.
Formula:
Use
This ADR Line provides guidance about how volumes of Demand and Supply are influencing the price of shares of a company which is traded on stock exchanges. It provides for how strong the buying and selling was during the period under consideration.
When a share closes near the high of the period's range and the stock has high volume, then indicators will take a high jump. Likewise if the price of stock closes near hgh of the range but the volume as compared is lower then ADR will not move up as much.
The ADR is used to assess price trends and potentially spot the upcoming reversals in trend of stock prices.
If the stock’s price is showing a downtrend at the same time the indicator i.e. the ADR Line is in an uptrend, then we can interpret as there may be a demand in the stock as buying volume is increased and the price of stock may reverse to the upside.
A strong rising ADR confirms the strong rise in prices of stock when the price of stock is in uptrend i.e. increasing and vice versa.
Conclusion
To summarise ADR indicator helps in the following cases;
For the onfirmation of current trend
For identifying Reversal in Trend
For identifyng Buying and Selling Pressure in the stock
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