Historical Price Data is Adjusted for Splits, Dividends and Distributions

Historical Price Data is Adjusted for Splits, Dividends and Distributions

We adjust our historical price data to remove gaps caused by stock splits, dividends, and distributions. That may cause our charts to look different from other services that do not perform the same adjustments.

For example, if a stock splits 2-for-1, the price is suddenly half of what it used to be, creating a large gap down on the chart. If you were unaware of the split, the chart would give you the impression that something bearish happened to the underlying company. In addition, most of the technical indicators on that chart would give sell signals because of the big drop in prices. Even though such a split is generally considered a neutral event, an unadjusted chart would contain lots of bearish signals.

In order to prevent these kinds of misleading signals from appearing on our charts, we adjust all the historical data prior to the event. In the case of a 2-for-1 split, we divide all of the historical prices for the stock by 2 and multiply all of the historical volume by 2, so that the bars prior to the split match up smoothly with the bars that appear after the split.

In addition to performing adjustments that remove large gaps caused by splits, we also adjust our historical data to remove smaller gaps caused by dividends and distributions. By making these additional adjustments, we ensure that all price movements on our charts are caused by pure market forces - i.e., the forces that Technical Analysis attempts to identify.

While these adjustments are very important for accurate technical signals, they can cause problems in the following circumstances:

  1. Our adjusted historical price data cannot be used to determine the actual buy or sell price for a stock at some point in the past.
  2. Our adjusted historical price data may not match up with unadjusted data from other sources.
  3. Adjusting historical price data can cause P&F reversal points to change if Traditional box scaling is used (the default).

Whenever a stock's historical data is adjusted, we add it to the list of recent adjustments on our Recent Data Adjustments page.

IMPORTANT NOTE: If you want to see an unadjusted chart for a stock, add an underscore character (“_”) to the front of the ticker symbol.

Dividend Adjustment Calculation Details

Historical prices are adjusted by a factor that is calculated when the stock begins trading ex-dividend. The amount of the dividend is subtracted from the prior day’s price, and the result is divided by the prior day’s price. Historical prices are then multiplied by this factor.

Example: A stock closes at $40.00 on Monday. Tuesday it begins trading ex-dividend based on a $2.00 dividend. If the stock opens unchanged, it will be trading at $38.00. Unless we adjust the prior prices, the chart will show a misleading $2.00 gap.

To calculate the adjustment factor we subtract the 2.00 dividend from Monday’s closing price of 40.00 (= 38.00). Then we divide 38.00 by 40.00 to determine the dividend adjustment in percentage terms. The result is 0.95.

We then multiply all historical prices prior to the dividend by 0.95. This adjusts historical prices proportionately so that they stay rationally aligned with current prices.

Split Adjustment Calculation Details

Adjustments for stock splits are similar, but to calculate the factor you just have to divide the number of shares after the split by the number of shares before the split. Example: To adjust for a 2-for-1 split, divide 1 by 2. The factor is 0.5.

Just like with dividend adjustments, we multiply all historical prices prior to the split by 0.5.

With splits, we also adjust the volume in the opposite direction of prices, so that the total liquidity remains the same. So, where we divided 1 by 2 to calculate the adjustment factor for prices, we divide 2 by 1 to calculate the adjustment factor for volume. The adjustment factor for volume is 2.0 in this case, so we multiply all volume prior to the split by the adjustment factor of 2.0.

Reverse splits are calculated the exact same way as regular splits. For a 1-for-4 reverse split, for example, you would divide 4 by 1 to calculate the adjustment factor for prices (4.0), and divide 1 by 4 to calculate the adjustment factor for volume (0.25).