What it means
For each period, record the high, low and closing prices; CLV compares the distance from the close to the low with the distance from the high to the close, and dividing by the high-low range scales the result so different price levels can be compared. A close at the high yields +1 and a close at the low yields -1, with the value changing continuously between them.
The zero midpoint does not mean the asset was unchanged from the previous day. Imagine a share closing at $104 after ranging between $100 and $110: its close is nearer the low, giving a negative CLV, even though it gained versus yesterday's $99 close.
Price location and day-to-day return differ, and a close near the low following a gap up can coexist with a positive daily return, just as a close near the high during a down day can have positive CLV. Neither signal alone measures overall performance.
The American Association of Individual Investors describes CLV as the first step in an accumulation/distribution calculation. Multiplying it by that period's trading volume gives a signed volume contribution, and a running total produces the indicator.
Volume weighting makes a high-volume period influence the accumulation/distribution line more than a low-volume period with the same CLV, which reflects the indicator's convention and not proof that one investor group actually bought or sold every traded unit. If the high and low are equal, the usual ratio divides by zero, so a charting system needs an explicit handling rule, often assigning zero or retaining a prior value, and the convention should be confirmed before comparing platforms.
The period can be a day, an hour or another interval, and different intervals can yield different highs, lows and closing observations, so state which one is used. A high-volume close near the top of the range can suggest strong demand during that interval, but late news, an auction or thin liquidity may explain the result.
Subsequent sessions may reverse the move, so treat the indicator as context. One period's high CLV should not be interpreted as a fixed amount of capital entering the security, because every trade has a buyer and a seller.
'Accumulation' is an analytical label for a price-volume pattern, not a literal cash-flow ledger. Analysts may compare price trends with the accumulation/distribution line to flag divergence, but a mismatch prompts further examination of volume, liquidity and news and does not demonstrate that a reversal is imminent.
CLV is best used with a stated question: did the asset finish near its high or low within the chosen interval? It cannot establish why the asset moved, whether the price is fair or what it will do next.
In practice
Real-world examples.
Example
A share ranges from $20 to $30 and closes at $30. Its CLV is +1 because the closing price equals the period high. An analyst reading the chart would describe it as a close at the top of the range.
Example
Another share trades between $20 and $30 but closes at $22. Its CLV is (44 - 30 - 20) / 10 = -0.6, which is negative even if the share was above its previous close. The negative reading describes where the close sat in the day's range and not the day's return.
Example
Two days both produce a CLV of +0.5, but one trades ten times as many shares. Its signed volume contribution to an accumulation/distribution line is ten times larger. The line therefore reflects the heavier trading day more strongly.
Formula
Calculation
CLV = [(close - low) - (high - close)] / (high - low) = (2 x close - high - low) / (high - low), when high exceeds low. At high $110, low $100 and close $104, CLV = (208 - 110 - 100) / 10 = -0.2. With volume 50,000, the illustrative signed volume contribution is -0.2 x 50,000 = -10,000. If high equals low, the formula is undefined and a platform-specific convention is needed.
Second day. At high $110, low $100 and close $108, CLV = (216 - 110 - 100) / 10 = 0.6. With volume 20,000, the signed contribution is 0.6 x 20,000 = +12,000. The running total after both days is -10,000 + 12,000 = +2,000.Case study
Seen in the real world.
Fictional example: An analyst sees that Orion shares rose from yesterday's $99 close to today's $104 close. She assumes the positive return means the stock finished strongly. Today's range was $100 to $110, however, and CLV is -0.2. She checks the day's news and volume before drawing a conclusion. The negative CLV describes a close below the range midpoint, while the positive day-to-day return describes a separate comparison.
Neither proves tomorrow's direction. She records both observations rather than choosing the one that favours her trade. In the invented numbers, the next session has the same $100 to $110 range and a close of $108, giving a CLV of 0.6 on 20,000 shares. Combined with the -10,000 from the first day on 50,000 shares, the running total is +2,000, so she notes that the indicator accumulates a sequence of days and no single day settles the picture.
Watch out
Common mistakes.
- Treating a positive or negative CLV as the security's return from its previous close.
- Dividing by zero when the period high and low are the same.
- Assuming one price-location reading reliably forecasts the next session.
Questions
People also ask.
What does zero CLV mean?
The close is at the midpoint of the selected high-low range, provided that range is nonzero.
Does CLV include volume?
Not by itself. Volume enters when CLV is multiplied for indicators such as the accumulation/distribution line.
Can a stock rise and have negative CLV?
Yes. It can close above yesterday's price while ending below the midpoint of today's range.
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