Upside/Downside Ratio

DEFINITION of 'Upside/Downside Ratio'

A technical indicator that shows the relationship between the volumes of advancing and declining issues on an exchange - in particular, the New York Stock Exchange. The upside/downside ratio is used to determine the momentum of the market at any particular time.


The ratio is calculated as follows:


Advancing Issues / Declining issues


Where


Advancing Issues = Total volume traded of securities that closed above their opening price Declining Issues = Total volume traded of securities that closed below their opening price

BREAKING DOWN 'Upside/Downside Ratio'

The upside/downside ratio is often smoothed using a standard moving average or other type of moving average to filter out smaller, less significant movements. Values greater than 1 are generated when more issues are advancing than declining, in terms of volume. Values less than 1 are created when more issues are declining than advancing, in terms of volume. The upside/downside ratio is often used to gauge over-bought and over-sold conditions in the market. Low values can indicate that the market is becoming over-sold and high value can demonstrate that the market is becoming over-bought. The upside/downside ratio is available as a technical indicator on many trading platforms.

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