Technicals Stability Returns
Throughout our site in both tutorial and screener, if we have given maximum emphasis on a parameter after price then it is volume. Other indicators give leads but it is volume which gives stamp of approval to signal. Because of this reason various volume based indicators emerged and some of the prominent ones are Chaikin Money Flow(CMF), One Balance Volume(OBV), Money Flow Index(MFI) and ADI. ADI is developed by Mark Chaikin who also developed CMF.
Greater details of price volume correlation include 'Volume precedes price, rising Volume in uptrending and price volume divergence is explained here. We recommend to read it together with OBV to have deeper understanding as some of the terms used in current article, is well explained there.
ADI is used to measure buying pressure vs selling pressures in the market. It is a simple chart generally at the bottom of price chart to quick get an idea about the bulls and bear action in the market. Unlike other oscillator, it is a cumulative indicator where value of previous ADI is added to latest value. It being dependent on volume as a prime input, its absolute value does not make much sense. Interpretation of ADL is its chart with respective to the price.
1. Money Flow Multiplier = [(Close - Low) - (High - Close)] /(High - Low)
2. Money Flow Volume = Money Flow Multiplier x Volume for the Period
3. ADL = Previous ADL + Current Period's Money Flow Volume
Key to the direction of ADL is MFI multiplier. It indicates where price action is accumulation or distribution where as volume indicates the intensity of accumulation/distribution or in other words whether money is flowing in or out of the stock.
Our website also provides free Stock screening based on Accumulation Distribution Index. It can be found at below link:
| Most Volatile Share | Beta Stocks | Chaikin Money Flow (CMF) | Average Directional Index (ADX) |
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