QuanTAlib/lib/volume/adl/Adl.md

# ADL: Accumulation/Distribution Line

> "Volume precedes price." — Old Wall Street Adage

The Accumulation/Distribution Line (ADL) is the bedrock of volume analysis. It attempts to answer a single, vital question: "Are the big players buying or selling?"

Unlike On-Balance Volume (OBV), which treats every up-day as 100% buying, ADL is nuanced. It looks at *where* the price closed within the day's range. A close near the high on massive volume screams "Accumulation." A close near the low on massive volume screams "Distribution."

## Historical Context

Developed by Marc Chaikin, the ADL was originally designed to spot divergences. Chaikin noticed that if a stock made a new high but the ADL failed to make a new high, a crash was imminent. He essentially quantified the "smart money" flow.

## Architecture & Physics

ADL is a cumulative indicator, meaning it has infinite memory. Today's value depends on the sum of all yesterdays.

The core mechanic is the **Money Flow Multiplier (MFM)**, also known as the Close Location Value (CLV). This value ranges from -1 to +1:

- **+1**: Close = High (Maximum Accumulation)
- **-1**: Close = Low (Maximum Distribution)
- **0**: Close is exactly in the middle

This multiplier is then applied to the volume to determine the "Money Flow Volume" for the period.

## Mathematical Foundation

### 1. Money Flow Multiplier (MFM)

$$
MFM = \frac{(Close - Low) - (High - Close)}{High - Low}
$$

### 2. Money Flow Volume (MFV)

$$
MFV = MFM \times Volume
$$

### 3. Accumulation/Distribution Line (ADL)

$$
ADL_t = ADL_{t-1} + MFV_t
$$

## Performance Profile

ADL is extremely lightweight.

| Metric | Complexity | Notes |
| :--- | :--- | :--- |
| **Throughput** | ~2ns / bar | Simple arithmetic + accumulation |
| **Allocations** | 0 bytes | Hot path is allocation-free |
| **Complexity** | O(1) | Constant time per update |
| **Precision** | `double` | Essential for cumulative sums |

## Validation

Validation is performed against **TA-Lib**, **Skender.Stock.Indicators**, and **Tulip Indicators**.

- **Accuracy**: Matches external libraries to 9 decimal places.
- **Edge Cases**: Handles `High == Low` (division by zero protection) by setting MFM to 0.

### Common Pitfalls

- **Gaps**: ADL ignores gaps. If a stock gaps up but closes near its low, ADL will register distribution, even if the price is higher than yesterday.
- **Scale**: The absolute value of ADL is meaningless; it depends on the start date of the data. Only the *trend* and *divergence* matter.
- **Volume Spikes**: A single bad data point with erroneous volume can permanently skew the ADL. Sanitize your data.