A cumulative volume indicator where each bar's contribution is weighted by where the close fell within the bar's high-low range — closes near the high count as accumulation, closes near the low count as distribution. More nuanced than OBV because a doji bar (close near middle) contributes near-zero, but the same confirmation-tool role.
On confirmation tools
A/D Line is a confirmation indicator. Its value comes from validating or invalidating moves generated by price-based systems, especially through divergence detection. Use it to filter price signals; rarely as a primary trigger.
A/D Line on MES daily — trend confirmation + divergence
What it measures
- Quality-weighted cumulative volume. Volume × (close's position within the high-low range). A bar that closes near its high adds positive flow; a bar that closes near its low adds negative flow.
- Hidden accumulation/distribution. Detects when institutions are quietly accumulating or distributing — the close-position weighting captures this better than OBV's bar-direction-only approach.
- Trend confirmation via slope. Like OBV, the A/D Line's trajectory matters more than its absolute value.
Formula
How AlgoLift computes it
For each bar:
CLV = ((Close − Low) − (High − Close)) / (High − Low) (Close Location Value)
Money Flow Volume = CLV × Volume
A/D Line[t] = A/D Line[t-1] + Money Flow Volume[t]
The CLV (Close Location Value) ranges from −1 (close at the low) to +1 (close at the high). A bar that closed at the midpoint contributes near zero — even on heavy volume.
This is the key differentiator from OBV. OBV adds full volume on any up-bar; A/D Line weights by how decisively the bar closed up. A weak rally with closes near bar midpoints contributes weakly to A/D Line while OBV treats it as a full positive contribution.
AlgoLift also exposes a smoothed version (default EMA period: 10) and the slope of that smoothed line.
Developed by Marc Chaikin.
Inputs in AlgoLift
| Setting | Default | Range | Notes |
|---|---|---|---|
| Smoothing Period | 10 | 1–200 | EMA period for the smoothed line. Set to 1 to read the raw cumulative line. |
Recommended settings
- 10 (default): Standard smoothing — clean enough for trend reading.
- 5: Faster — for short-timeframe trading.
- 20–30: Slower — emphasizes only major flow changes.
Outputs in AlgoLift
| Handle | Type | Plotted | Notes |
|---|---|---|---|
| A/D Line (Raw) | Numeric | Always | Cumulative running total. |
| A/D Line (Smoothed) | Numeric | Always | EMA-smoothed version — the primary reading. |
| Slope (Smoothed) | Numeric | On select | Rate of change of the smoothed line. |
| Raw Money Flow | Numeric | On select | Per-bar Money Flow Volume — useful for inspection. |
A/D Line node — default state
How to read it
- A/D Line rising: Accumulation in progress — closes near highs are dominating, volume confirms upside.
- A/D Line falling: Distribution in progress — closes near lows dominate.
- A/D Line flat during a price rally: Bars are closing near midpoints despite price moving up — a warning that the rally lacks decisive participation.
- Divergence between A/D Line and price: Same interpretation as OBV divergence — often precedes reversals.
A/D Line generally produces fewer false signals than OBV in choppy markets because the CLV weighting filters out indecisive bars. In trending markets, the two indicators usually agree.
A/D Line is OBV with quality-weighting. Where OBV asks "did the bar close up or down?", A/D Line asks "how decisively?" In markets where bars frequently close near their midpoints (chop), A/D Line is the more reliable read. In strong trends, OBV and A/D Line agree.
Best in / worst in
Best in trending markets and as a confirmation indicator for breakouts. The close-location weighting makes A/D Line particularly good at distinguishing strong trend moves (decisive closes) from weak ones (closes near midpoints).
Worst in instruments with frequent gaps — the CLV calculation can produce extreme single-bar values when high-low range is large. Also weak on very-low-volume instruments where the cumulative sum doesn't have enough data to be meaningful.
Three confirmation patterns
1. Trend confirmation
Validate trends from price-based systems.
- Valid long trend: Price > EMA(50) AND A/D Line slope > 0.
- Valid short trend: Price < EMA(50) AND A/D Line slope < 0.
- Suspect trend: Price moving but A/D slope flat → skip new entries.
A/D-confirmed trend entry
2. Breakout confirmation
Filter breakouts by A/D agreement.
- Valid upside breakout: Price closes above a 20-bar high AND A/D Line (Smoothed) is making a new 20-bar high too.
- Failed breakout: Price makes new high but A/D doesn't → high probability of mean reversion.
The close-location weighting catches "breakouts" where price hit the level but closed weakly — exactly the kind of false breakout that retail strategies often chase.
3. Hidden accumulation detection
When price is consolidating but A/D Line is rising, institutions may be quietly accumulating.
- Setup: Price has been within 2% of its 30-bar mean for at least 20 bars (consolidation).
- Long signal: A/D Line has made a new 30-bar high during the consolidation → arm a long entry on the first close above the consolidation range.
A pattern that picks up moves before price confirms them.
Advanced patterns in AlgoLift
A/D Line + price divergence with BarsAgo Modifier. Wire Price > Price 10 bars ago AND A/D Line < A/D Line 10 bars ago — captures bearish divergence directly. Pair with a regime filter (KAMA ER < 0.3) for high-conviction counter-trend entries.
A/D Slope as a scaled-entry confirmation. Take initial position on a price-based system. Use Scaled Entry to add only when A/D Slope confirms the direction. Volume-quality-confirmed scaling.
Raw Money Flow for individual bar analysis. The per-bar Money Flow Volume output lets you set up a Tally over the last N bars — "how many of the last 10 bars had strongly positive money flow?" is a direct measure of recent buying conviction.
Cross-instrument A/D for portfolio context. Compute A/D Line on a benchmark instrument (e.g., SPY) alongside an individual symbol via separate Data Source nodes. When the symbol's A/D outperforms the benchmark's, the stock is relatively strong. See the multi-series Visual Builder pattern.
Common mistakes
- Treating A/D Line and OBV as interchangeable. They measure different things. OBV uses bar-direction; A/D Line uses close-location. They often agree but the disagreements are informative.
- Reading the absolute value. Like OBV, A/D Line drifts to arbitrary numbers. Trajectory matters, value doesn't.
- Using on gap-prone instruments without adjustment. A single gap-and-fill bar can produce an extreme Money Flow Volume reading that distorts the cumulative line. Apply session filters or use the smoothed output to dampen these.