The accumulation/distribution line improved results dramatically over the classic OBV approach to volume divergences. He created a cumulative line by adding a percentage of total volume to the line if the close was higher than the opening and, subtracting a percentage of the total volume if the close was lower than its opening price. In order to determine whether there was accumulation or distribution in the market or an individual stock on a given day, Granville compared the closing price to the previous close, whereas Williams compared the closing price to the opening price. Larry Williams took the OBV concept and improved on it. However, when an OBV line gives a divergence signal versus a price extreme, it can be a valuable technical signal and usually triggers a reversal in price. The reason is that there are too many important tops and bottoms, both short-term and intermediate-term, where OBV confirms the price extreme. The Granville OBV concept which views the total volume on an up day as accumulation and the total volume on a down day as distribution is a decent one, but much too simplistic to be of value. While volume has always been mentioned by technicians as important, little effective volume work was done until Joe Granville and Larry Williams began to look at volume versus price in the late 1960s in a more creative way.įor many years it had been accepted that volume and price normally rose and fell together, but when this relationship changed, the price action should be examined for a possible change of trend. Very often, volume divergences versus price movement are the only clues to an important reversal that is about to take place. Volume analysis helps in identifying internal strengths and weaknesses that exist under the cover of price action. Technical analysis of both market averages and individual stocks must include volume studies in order to give the technician a true picture of the internal dynamics of a given market. The following discussion of volume accumulation/distribution interpretation, written by Marc Chaikin, is reprinted here with his permission: The Chaikin Oscillator is a moving average oscillator based on the Accumulation/Distribution indicator. This is what we mean by empowering small businesses to succeed."Īll Relate products offer at least two flexible plan options to suit different business needs.Inspired by the prior work of Joe Granville and Larry Williams, Marc Chaikin developed a new volume indicator, extending the work done by his predecessors. From there, they can manage their online reputation to build brand trust, with all their online reviews and business listings in one place.
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