whereas distribution is defined by a market controlled by sellers.
Williams recommends trading this indicator based on divergences:
Distribution of the security is indicated when the security is making
a new high and the A/D indicator is failing to make a new high. Sell.
Accumulation of the security is indicated when the security is making
a new low and the A/D indicator is failing to make a new low. Buy.
((Closei−1 −Closei)+PI / (Highi −Lowi )+PI ) ×Volumei
where Closei−1=Closing price corresponding to time interval (i−1):
TIi−1Close i=Closing price corresponding to time interval i:
TI i Highi=Max (Highi, Closei−1) Lowi=Min (Lowi, Closei−1)
PI=Price interval (usually US $0.01)
Once calculated it then can be averaged out to create two distinct lines which sepearte large effective volume from small effective volume. When there is divergence between large volume and price it's an indication that big players are entering the market. It's used only on the one minute time frame.