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 Line - A/D

    A technical indicator that plots changes in the value of the ...
  3. Advance/Decline Ratio- ADR

    A market-breadth indicator used in technical analysis to compare ...
  4. Toraku Index

    A technical indicator that compares the number of advancing stocks ...
  5. Market Indicators

    A series of technical indicators used by traders to predict the ...
  6. Decline

    When a security's price falls in value over a given trading day ...
Related Articles
  1. Trading Strategies

    Key No.2: Advance/Decline Is Falling Down

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

    Market Strength: Advancers to Decliners

    The advance/decline line (A/D) is a technical analysis tool and is considered the best indicator of market movement as a whole. Stock indexes such as the Dow Jones Industrial Average (DJIA) ...
  3. Investing Basics

    3 Key Signs Of A Market Top

    When stocks rise or fall, the financial fate of investors change, as well. There are certain signs that can reveal a stock’s course, and investors don’t need to be experts to spot them.
  4. Active Trading Fundamentals

    Market Breadth: Advance/Decline Indicators

    Thirty stocks make up the Dow Jones Industrial Average. If the Dow moves up 20 points, there's no way to tell from that number if the increase is the result of only one stock going way up or ...
  5. 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 ...
  6. Technical Indicators

    Calculating the Arms Index (TRIN)

    The Arms Index is a technical analysis indicator that’s used to predict price movements in the market on an intraday basis.
  7. Professionals

    Technical Analysis – Other Indicators

    Technical Analysis – Other Indicators
  8. Trading Strategies

    Market Strength: Introduction

    There is an old saying that seems to always apply to the investment world: "hindsight is 20/20". When looking one, three or six months into the past, we can easily tell what the market did and ...
  9. Active Trading Fundamentals

    Market Breadth: Conclusion

    This directory on market breadth introduces traders to how they can gain an advantage in the market, but it will take time to master the movements of each individual indicator. Try following ...
  10. Professionals

    Average Market Returns

    We look at the major indexes and their average yearly returns.
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. Why is it important for traders and investors to follow market indicators?

    Learn about market indicators such as the Advance/Decline Index and market breadth. Discover why these indicators are so ... Read Answer >>
  3. 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 >>
  4. What are the most common market indicators experienced traders follow?

    Take a look at some of the most popular market indicators used by technical analysts, including the advance/decline line ... Read Answer >>
  5. 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 >>
  6. 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 >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center