Williams' AD is the accumulated sum of positive "accumulational" and negative "distributional" price movements.
For example, if the current closing price is higher than the previous one, W/AD increases
by the difference between the current closing price and the true minimum. If the current closing
price is lower than the previous one, W/AD decreases by the difference between the current
closing price and the true maximum.
The term "accumulation" denotes a market controlled
by purchasers and the term "distribution" means
that sellers control the market.
Divergences between the indicator and the price are a signals.
Like most indicators, W/AD leads the tool price. In other words,
when a divergence appears, the price changes its direction
according to the indicator.
If the price reaches a new maximum, but the
accumulation/distribution indicator cannot reach a new
maximum, it means that the security is distributing itself.
It is a signal for sell.
If the price reaches a new minimum, but the
accumulation/distribution indicator cannot reach a
new minimum, it means that the security is accumulating.
It is a signal for buy.
To calculate the accumulation/distribution indicator, first
you have to find a "True Range High" (TRH) and "True Range Low" (TRL):
Then you must find the current value of accumulation/distribution
(CurA/D) by comparing today and yesterday's closing prices.
Williams' accumulation/distribution indicator is a
growing sum of these values for each day: