Market Breadth: Conclusion
  1. Market Breadth: Introduction
  2. Market Breadth: Volume Studies
  3. Market Breadth: 52-Week Highs/Lows
  4. Market Breadth: Advance/Decline Indicators
  5. Market Breadth: Point & Figure Internal Indicators
  6. Market Breadth: Conclusion

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 two or three internal indicators every day instead of trying to master them all. Many of the indicators overlap, so find the ones that work for your personal trading style and focus on those. Always rely first on the price data of the vehicle you're trading, and then check that the internal indicators reinforce your position.

Here is an overview of the main points we dealt with in this tutorial on market breadth:

  • Internal indicators measure market breadth, which refers to the amount of force and the level of participation behind market moves.
  • The most common data used to build internal indicators are volume, advance/decline and new highs/lows.
  • Strong volume in the day's winners indicates buyers are winning the day, and vice versa.
  • Advance/decline data gives traders a look into how many different companies are taking part in a rally or decline. The more companies taking part, the broader the move.
  • New highs or lows for a company indicate exceptionally positive or negative feelings toward its performance. If many stocks are making new highs or lows, movements in the broad market should mirror that sentiment.
  • Point-and-figure charting, by removing the time element from the chart and recording only larger price moves, helps filter out market noise.
  • Internal indicators are most useful when used in conjunction with a price chart.
  • Market breadth should never be used to rationalize an otherwise bad trade. The price action trumps everything else when it hits a stop-loss.
  • Internal indicators are used to confirm price moves in a given market, and they should generally print the same shape as the underlying price chart, making highs and lows near the same date.
  • An important warning signal is given when an internal indicator diverges from the direction of the market in question, indicating that a price move is not widely supported by market participants.
  • A reversal occurring when an internal indicator is in an overbought or oversold condition may mean fast moving price changes are ahead.

  1. Market Breadth: Introduction
  2. Market Breadth: Volume Studies
  3. Market Breadth: 52-Week Highs/Lows
  4. Market Breadth: Advance/Decline Indicators
  5. Market Breadth: Point & Figure Internal Indicators
  6. Market Breadth: Conclusion
RELATED TERMS
  1. Breadth Indicator

    A mathematical formula that uses advancing and declining issues ...
  2. Market Indicators

    A series of technical indicators used by traders to predict the ...
  3. Breadth of Market Theory

    A technical analysis theory that predicts the strength of the ...
  4. Breadth Thrust Indicator

    A technical indicator used to ascertain market momentum. The ...
  5. Market Breadth

    A technique used in technical analysis that attempts to gauge ...
  6. Toraku Index

    A technical indicator that compares the number of advancing stocks ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. What is the difference between market indicators and economic indicators?

    Read about the differences between technical market indicators and general economic indicators, and learn how traders and ... Read Answer >>
  5. 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 >>
  6. 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 >>

You May Also Like

Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. 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; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. 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 ...
Trading Center