
This indicator represents the accumulated sum of positive “accumulative” movements of price and negative “distributives”. The “accumulation” notion is applied as a reference to the market, which is controlled by customers. The “distribution” notion means that market is controlled by sellers.
So, if the current price of closing is higher than the antecedent one, than W_A/D is increased by the difference of the true minimum and the current price of closing. But if the current price of the closing is lower than the antecedent one, than the W_A/D is decreased by the difference of the true minimum and the current price of closing.
It is recommended to use divergences as the trade signals of this indicator:
- If the price achieves new maximum, and the indicator fails to reach a new maximum than there is a distribution of paper. And this is a signal for selling.
- If the price achieves new minimum and the indicator fails to reach a new minimum than there is an accumulation of paper. And this a buying signal.