Advances & Declines - Stock Trader Glossary

The Advances and Declines (A/D) is a technical analysis tool that compares the number of stocks that are rising versus the number of stocks that are falling. This information is typically gathered from an exchange or market index and is used to provide an indication of the overall market sentiment. It also is applicable to entire markes, i.e.to the all stocks traded on the market.

The A/D line is calculated by taking the difference between the number of advancing stocks and the number of declining stocks. If more stocks are advancing than declining, the A/D line will be positive, indicating bullish sentiment. Conversely, if more stocks are declining than advancing, the A/D line will be negative, indicating bearish sentiment.

The Cumulative Advance/Decline Line is a running total of the A/D line over time. This line is plotted on a chart and can be used to identify trends in market sentiment. If the line is moving up, it indicates that the market is generally bullish, while a downward trend indicates a bearish market.

The Advance/Decline Ratio is another tool that measures market breadth by comparing the number of advancing stocks to the number of declining stocks. This ratio is calculated by dividing the number of advancing stocks by the number of declining stocks. A ratio greater than 1 indicates a bullish market, while a ratio less than 1 indicates a bearish market.

Overall, the Advances and Declines, Cumulative Advance/Decline Line, and Advance/Decline Ratio are all important tools that provide insight into market breadth and sentiment. Traders and investors can use this information to make informed decisions about their investments and to identify potential opportunities for profit.