Advance/Decline Index

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

BREAKING DOWN '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. Advance/Decline Ratio- ADR

    A market-breadth indicator used in technical analysis to compare ...
  3. Market Indicators

    A series of technical indicators used by traders to predict the ...
  4. Dow Jones U.S. Market Index

    A market-capitalization-weighted index maintained by Dow Jones ...
  5. Broad-Based Index

    An index designed to reflect the movement of the entire market. ...
  6. S&P MidCap 400 Index

    This Standard & Poor's index serves as a barometer for the ...
Related Articles
  1. Trading Strategies

    3 Key Signs Of A Market Top

    Learn the best ways to foresee market corrections and how to profit from them.
  2. Insurance

    Exploring Oscillators and Indicators: Market Indicators

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com The technical indicators that are generally aimed at specific stocks, which were discussed in previous sections, can also ...
  3. Stock Analysis

    Advance-Decline Line: Simple Breadth Indicator Can Be Used to Spot Trend Reversals

    Market breadth indicators are based on the number of stocks going up or down and the Advance-Decline (A-D) Line is the simplest way to measure breadth. Every day, the number of stocks that closed ...
  4. Mutual Funds & ETFs

    Index Investing: What Is An Index?

    An index is a statistical measure of the changes in a portfolio of stocks representing a portion of the overall market. It would be too difficult to track every single security trading in the ...
  5. Technical Indicators

    Use The McClellan Oscillator To Measure Market "Breadth"

    How broad is the market? And, once we answer that question, how can we use that answer to our advantage?
  6. Mutual Funds & ETFs

    Index Investing: Conclusion

    We hope this tutorial has given you insight into how you can track the market, use it as a benchmark and make investments. Some points to remember: An index is a statistical measure of the changes ...
  7. Options & Futures

    Using Index Futures To Predict The Future

    Want to know whether the stock market will open up or down? Check out the index futures.
  8. Mutual Funds & ETFs

    Index Investing: Other Indexes

    We've covered most of the big U.S. indexes, but we've barely scratched the surface of all the other indexes in the world. There are literally thousands of indexes tracking nearly any market. ...
  9. Options & Futures

    Index Options: A How-To Guide

    Index options, financial derivatives that derive their value from a stock index, can provide stability and peace of mind for less risky investors.
  10. Investing

    What are Index Funds?

    An index fund is a type of mutual fund that is tied to a broad stock index like the S&P 500 or the Dow Jones Industrial Average, instead of being handpicked and managed by an investment manager. ...
RELATED FAQS
  1. What are the main signals traders use from an Advance/Decline ratio?

    Find out how traders and technical analysts employ the Advance/Decline ratio, and what values are considered important trading ... Read Answer >>
  2. What are the most common market indicators to follow the European stock market and ...

    See which market indicators and major market indexes are used most frequently by traders and analysts to measure the European ... Read Answer >>
  3. How do traders identify confirmation of prices on a chart?

    Learn about some of the crucial tools that traders can use to confirm their price movements on a chart before entering or ... Read Answer >>
  4. Why is the Breadth Indicator useful for tracking the overall economy?

    See how analysts might use technical breadth indicators to judge the health of the economy as a whole, and learn why one ... Read Answer >>
  5. What indicators help define a bull market?

    Learn about a number of various technical indicators traders and analysts use to define and confirm the existence of a bull ... Read Answer >>
  6. How do I invest or trade market indicators?

    Read about how investors can trade actual market indicators, such as the S&P 500 Index, rather than specific stocks or commodities. Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center