# Understanding Accumulation Distribution Line

The Accumulation Distribution Line is a volume-based indicator designed to measure the cumulative flow of money into and out of a security. The indicator was developed by Marc Chaikin and he referred to it as Cumulative Money Flow line. This indicator attempts to measure the ratio of buying to selling by comparing the price movement of a period to the volume of that period.

First, a multiplier is calculated based on the relationship of the close to the high-low range. Second, the Money Flow Multiplier is multiplied by the period’s volume to come up with a Money Flow Volume. A running total of the Money Flow Volume forms the Accumulation Distribution Line. Chartists can use this indicator to affirm a security’s underlying trend or anticipate reversals when the indicator diverges from the security price.

## Calculation Steps:

There are three steps to calculating the Accumulation Distribution Line.

## First

Calculate the Money Flow Multiplier.
Money Flow Multiplier = [(Close – Low) – (High – Close)] /(High – Low)

## Second

Multiply this value by volume to find the Money Flow Volume.
Money Flow Volume = Money Flow Multiplier x Volume for the Period

## Third

Create a running total of Money Flow Volume to form the Accumulation Distribution Line (ADL).