What is the Advance/Decline Index
The advance/decline index is the total number of advancing and declining security prices in the stock market. This value is calculated in real-time and is one of the most widely used market breadth indicators. The advance/decline index can be charted for any major index, but the NYSE is the most popular as its one of the largest U.S. exchanges.
Advance/Decline Index Formula
Advance/Decline Index = (Advances - Declines) + Advance/Decline Index Value of previous period
How to Use the Advance/Decline Index Line
The advance/decline index is used to measure the breadth of the market by long-term investors. The index is not a timing indicator by itself, but can be used with other key market signals to gauge when the market is losing steam. For example, if the market continues to make new highs, but the advance/decline index is trending lower, this implies that there are fewer issues carrying the market higher. When the value of the technical indicator formula is printed on a price chart, it is known as the advance/decline line. Conversely, if the market is trending strongly in one direction and the advance/decline index confirms this movement, odds are the market will continue in the direction of the primary trend.
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