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There are many indicators available to measure volume and the flow of money for a particular stock, index or security. One of the most popular volume indicators over the years has been the Accumulation/Distribution Line. The basic premise behind volume indicators, including the Accumulation/Distribution Line, is that volume precedes price. Volume reflects the amount of shares traded in a particular stock, and is a direct reflection of the money flowing into and out of a stock. Many times before a stock advances, there will be period of increased volume just prior to the move. Most volume or money flow indicators are designed to identify early increases in positive or negative volume flow to gain an edge before the price moves.

The Accumulation/Distribution Line was developed by Marc Chaikin to assess the cumulative flow of money into and out of a security. It uses a formula to determine positive and negative volume values, depending on the relation between high, low and close prices.

VAO:  Volume Accumulation Oscillator (Chaicin Oscillator, Accumulation/Distribution...)

Fairly simpel in use, the resulting line shows if a stock is under accumulation or distribution. If the indicator moves but the stock is not moving, or moving in the opposite direction, it gets interesting. If the indicator shows the stock is under accumulation, but the price doesn't increase, a big move upward likes plausible. Likewise, if the indicator indicates the shares are being distributed, but the stock doesn't fall, a dive seems imminent.

These situations where an indicator and a stock are following different paths, are called divergences, and are an important part of technical analysis.