The AD oscillator was developed by Larry Williams and measures accumulation and distribution.

Buying Power is BP = High - Open

Selling Power is SP = Close - Low

Daily Raw Figure or DRF = BP + SP divided 2 *(H-L)

                                 DRF =  H-L+C-O/2*(H-L)

The A/D solves the problem of volatility and trading ranges.

The raw DRF and the smoothed DRF are plotted on the same graph, on a scale of 0 to 1 and two horizontal lines can be drawn to isolate the overbought and oversold situation. Two corresponding lines are drawn for the smoothed oscillator.

This oscillator can be used as a trading system: Sell when the DRF generates the overbought zone.  Close all long position and go short on the open of the next day. Buy when DRF penetrates the oversold zone. Go long on the open next day.