DEFINITION of Upside/Downside Ratio

The upside/downside ratio is a market breadth indicator that shows the relationship between the volumes of advancing and declining issues on an exchange. Investors typically use the indicator to determine the momentum of the market at any given time.

The upside/downside ratio is calculated as follows:

﻿\begin{aligned} &Upside/Downside~Ratio = \dfrac{Advancing~Issues}{Declining~Issues}\\ &\textbf{where:}\\ &Advancing~Issues=\text{\small total volume traded of securities that}\\&\text{\small close above their opening price}\\ &Declining~Issues=\text{\small total volume traded of securities that}\\&\text{\small close below their opening price}\\ \end{aligned}﻿

BREAKING DOWN Upside/Downside Ratio

The upside/downside ratio is often smoothed using a simple moving average to filter out smaller, less significant movements. The indicator generates values greater than 1 when the volume on advancing issues is greater than declining issues. It generates values less than 1 when the volume on the declining issues is greater than advancing issues. The upside/downside ratio, also known as the upside/downside volume ratio, is available as a technical indicator on many trading platforms. (For further reading, see: How to Use Volume to Improve Your Trading.)