Advance/Decline Index

AAA

DEFINITION of 'Advance/Decline Index'

A technical analysis tool that represents the total difference between the number of advancing and declining security prices. This index is considered one of the best indicators of market movements as a whole. Stock indexes such as the Dow Jones Industrial Average only tell us the strength of 30 stocks, whereas the advance/decline index can provide much more insight into the movements of the market.

Advance/Decline Index

INVESTOPEDIA EXPLAINS 'Advance/Decline Index'

In general, rising values of the advance/decline can be used to confirm the likelihood that an upward trend will continue. If the market is up but there are more declining issues than advancing ones, it's usually a sign that the market is losing its breadth and may be getting ready to change direction.

Imagine that the advance/decline index on the S&P 500 is currently at 1835. If at the end of the last trading day, 300 stocks were up (advance) and 200 were down (decline), 100 would be added to the advance/decline index value, pushing it to 1935.

When this index is plotted on a chart, it is known as the "advance/decline line".

RELATED TERMS
  1. Advances And Declines

    The number of stocks that closed at a higher price than the previous ...
  2. High-Low Index

    An index that seeks to provide confirmation of a market trend ...
  3. Index

    A statistical measure of change in an economy or a securities ...
  4. Breadth Indicator

    A mathematical formula that uses advancing and declining issues ...
  5. Advance/Decline Line - A/D

    A technical indicator that plots changes in the value of the ...
  6. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
RELATED FAQS
  1. Why is it important for traders and investors to follow market indicators?

    Traders and investors regularly look at several sets of data, including technical analysis tools, fundamentals like company ... Read Full Answer >>
  2. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  3. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  4. How can a company execute a tax-free spin-off?

    The two commonly used methods for doing a tax-free spinoff are either to distribute shares of the spinoff company to existing ... Read Full Answer >>
  5. How are American Depository Receipts (ADRs) priced?

    The price of an American depositary receipt (ADR) is determined by the bank or other financial institution that issues it. ... Read Full Answer >>
  6. How can EV/EBITDA be used in conjunction with the P/E ratio?

    Because they provide different perspectives of analysis, the EV/EBITDA multiple and the P/E ratio can be used together to ... Read Full Answer >>
Related Articles
  1. Active Trading

    Is A Reversal On The Way? Consult Traders' Index

    Use this indicator to gauge the end of a price trend.
  2. Technical Indicators

    Discovering the Absolute-Breadth Index and the Ulcer Index

    It's time to acquaint yourself with these lesser-known yet effective technical indicators.
  3. Trading Strategies

    Market Strength Tutorial

    Here you can learn about some of the indicators that traders and brokers use to determine the direction and strength of the market's present trend.
  4. Chart Advisor

    ChartAdvisor for July 30 2015

    Weekly technical summary of the major U.S. indexes.
  5. Active Trading Fundamentals

    Five Biggest Obstacles Facing First-Year Traders

    Address these five obstacles and you'll make significant progress as a first-year trader.
  6. Options & Futures

    How To Hedge Put Options Using Binary Options

    Want to hedge your plain vanilla long put option position with binary call options? We show you how.
  7. Options & Futures

    How To Hedge Stock Positions Using Binary Options

    Here’s a step-by-step method to hedge your long (and short) positions in stocks, using binary options.
  8. Trading Strategies

    Microsoft's Game of Catch-Up With The Dow

    Microsoft (MSFT) underperformed the Dow Jones Industrial Average during the 2002 to 2007 bull market, but it has played catch-up in recent years.
  9. Charts & Patterns

    Avoid The Perfection Trap In Trading

    Avoid the perfection trap and make peace with the market’s high levels of systematic noise.
  10. Options & Futures

    How To Hedge Call Options Using Binary Options

    Here is a step-by-step walk through how to hedge a long call position with binary options.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!