Breadth Indicator

DEFINITION of 'Breadth Indicator'

A mathematical formula that uses advancing and declining issues to calculate the amount of participation in the movement of the stock market. By evaluating how many stocks are increasing or decreasing in price and how many trades investors are placing for these stocks, breadth indicators can show whether overall market sentiment is bullish (positive market breadth) or bearish (negative market breadth). Investors can also use breadth indicators to evaluate the behavior of a particular industry or sector, or to analyze the magnitude of a rally or retreat.

BREAKING DOWN 'Breadth Indicator'

There are several different types of breadth indicators used by technical analysts, such as the force index, Chaikin oscillator, up/down volume ratio, up/down volume spread, on-balance volume and cumulative volume index. One well-known breadth indicator is the Arms index, which evaluates the relationship between the numbers of advancing and declining stocks and the trading volume of each. This breadth indicator helps investors determine whether the market is bullish, bearish or neutral. A drawback to this indicator is that it can become inaccurate when the market behaves unusually.

RELATED TERMS
  1. Breadth of Market Theory

    A technical analysis theory that predicts the strength of the ...
  2. Market Breadth

    A technique used in technical analysis that attempts to gauge ...
  3. Market Indicators

    A series of technical indicators used by traders to predict the ...
  4. Breadth Thrust Indicator

    A technical indicator used to ascertain market momentum. The ...
  5. Toraku Index

    A technical indicator that compares the number of advancing stocks ...
  6. Absolute Breadth Index - ABI

    A market indicator used to determine volatility levels in the ...
Related Articles
  1. 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 ...
  2. Active Trading Fundamentals

    Market Breadth: Introduction

    Each day at the posts of specialists at the New York Stock Exchange, and inside the networked computers of Nasdaq market makers, a battle between bulls and bears rages. Each side tries to pull ...
  3. 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 ...
  4. Active Trading

    Introduction To The Arms Index

    Developed in 1967 by Richard Arms, this volume-based breadth indicator can be applied over various time periods.
  5. 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) ...
  6. Active Trading Fundamentals

    Market Breadth: Volume Studies

    Fortunately, the basic signals conveyed by volume data are easy to read. When a stock is traded, the transaction is recorded and included in the daily volume. When volume levels spike for a ...
  7. Active Trading Fundamentals

    Market Breadth: 52-Week Highs/Lows

    Because of the broad market implications and forceful nature of new 52-week highs/lows, market technicians keep a close eye on this statistic. The field of technical analysis has designed a ...
  8. 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?
  9. 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 ...
  10. Forex Education

    On-Balance Volume

    The on-balance volume indicator (OBV) is one of the most well-known technical indicators, and it focuses on the importance of volume and how it can affect a given price and asset's momentum.
RELATED FAQS
  1. 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 >>
  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. How can I use market breadth to my advantage?

    Market breadth is a study that compares the number of companies on a given exchange that have created new 52-week highs to ... 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 Toraku Index important for analysts of the Tokyo Stock Exchange?

    Learn how the Toraku Index is used to predict market trends on the Tokyo Stock Exchange, and understand how market breadth ... Read Answer >>
  6. What are the most common strategies for using the Absolute Breadth Index (ABI)?

    Read about some of the ways in which technical investors use the absolute breadth index to measure whether a market trend ... Read Answer >>
Hot Definitions
  1. 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 ...
  2. Keynesian Economics

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

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

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center