Accumulation/Distribution %

2021년 8월 31일

This script takes the signal from the Accumulation Distribution indicator invented by Larry Williams and normalizes it such that it becomes an oscillator about a zero line as described by John Bollinger in his book Bollinger on Bollinger Bands . The purpose of the indicator is to serve as a volume-based confirmation of signals given by other indicators, typically Bollinger Bands paired with a momentum indicator . In the example shown, Bollinger Bands are paired with Bollinger Bands %B and the Bollinger Bands %B indicator is interpreted similar to the Relative Strength Index ( RSI ) which is a momentum indicator .

The AD% indicator is colorized such that positive readings are green and negative readings are red. The readings become darker when approaching the zero line. The colorization is also displayed on the price chart. The chart type needs to be set to "bars" for price colorization to work properly.

The formula for this indicator is presented in the John Bollinger book as follows:
10-day sum of [(close-open)/( high-low )*volume]/10-sum of volume

How to use (my take on a strategy from the book):

1. Look for %B readings that are oversold or overbought (less than 0.00 or greater than 1.00)
2. Check for bearish divergence or bullish convergence of price and %B as shown on the chart
3. Verify divergence or convergence with AD%
4. Note previous trending/crossover behavior of AD% and %B and compare to situation being analyzed
5. A conservative trader may consider buying/selling on a close beyond the 20-day moving average and an AD% zero line crossover (color change)
6. An aggressive trader may consider buying/selling on a color change alone, on a breakdown of %B, or some other signal(s).

Securities behave differently from one another and this strategy doesn't work for all of them. As with any strategy, check past performance to make sure this approach is a good fit. Bandwidth ( volatility ) squeeze is another strategy which seems to work well for this security. For that reason, it was used to demonstrate buy signals, but squeezes aren't always so predictable. AD% may be useful for determining which direction a squeeze will resolve itself, as was the case here. Further information on volatility squeeze trading can be found in the John Bollinger book Bollinger on Bollinger Bands or online.

The default TradingView Accumulation Distribution indicator does not incorporate opening price. The formula used for this indicator does, so there are multiple versions of the A/D formula.

Despite the buy signal indicated, I'm not going long Hecla Mining here and I don't recommend it. I'd need to do further DD before doing so.

Please feel free to ask questions.