Volume Accumulation Oscillator (VAO)
Marc Chaikin’s Volume Accumulation Oscillator (VAO), known also as the Accumulation/Distribution Indicator, is an extension of the On Balance Volume (OBV) indicator. The VAO is a momentum indicator that associates changes in price and volume.
The formula for the VAO is:
The VAO is a lower technical study. No input parameters are needed to calculate the VAO.
When the VAO moves up, it shows that the security is being accumulated, as most of the volume is associated with upward price movement. When the indicator moves down, it shows that the security is being distributed, as most of the volume is associated with downward price movement.
When there is divergence between the VAO and the price action, this implies a change is imminent. For example, if the indicator is rallying and the security’s price is falling, prices will probably reverse in the near future.