The AD Volume Line indicator measures buyer and seller strength.
You need to calculate the volume of securities that close upwards and downwards end of the day.
You have to calculate the difference between the upwards volume and the downwards volume.
The AD Volume Line indicator accumulating this difference day after day to draw the line.
This difference is the Net Advancing Volume:
- It is positive when the volume of stocks that ended the day up is higher than the volume of stocks that ended the day down.
- It is negative when the volume of stocks that ended the day up is lower than the volume of stocks that ended the day down.
You can calculate the line on the significant S&P500, Nasdaq and NYSE indices to highlight the trend’s strength.
During a bullish trend, it shows a strengthening of the upward pressure and confirms the presence of an up-trend.
During a bearish trend, it shows a strengthening of the downward pressure and confirms the presence of a down-trend.
The AD Volume Line Indicator using an average of 10/20 periods when calculate.
AD Volume Line Indicator Divergences
There is a positive divergence when the index declines with new decreasing lows, while the AD Volume Line rebounds and draws increasing lows.
There is a negative divergence when the index moving up with new increasing highs, while the AD Volume Line weakens and draws decreasing highs.
You can draw the trendlines on the AD Volume Line to identify potential levels of support and resistance.
On the same line, you can calculate the moving averages to find some trading signals.
- When the line of the ADV Line crosses its moving average from bottom to top, an upward inversion signal is provided.
- When the line of the ADV Line crosses, from top to bottom, its moving average, a downward inversion signal is provided.
- When the line of the ADV Line is growing and remains above its moving average, it confirms the presence of an upward trend in the market.
- When the line of the ADV Line is decreasing and remains below its moving average, it confirms the presence of a downward trend in the market.
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