What is Advance – Decline Index?
Advance – Decline Index is one of the most powerful technical analysis tools for analyzing market strength of movement. It is a simple indicator which is derived as the difference between the total number of advancing (bullish) stocks and total number of declining (bearish) stocks. Advance/decline index favor all type of traders – short-term and long-term traders – and can be used for trading many financial instruments – stocks, ETFs, futures and currencies.
For easy interpretation, advance – decline index is often plotted on a chart called ‘advance – decline line’. The values for each point is calculated by the formula
A-D index = (No. of Advancing stocks – No. of declining stocks) + A-D value of previous period.
The period can be 30 minutes or 1 hour for short-term traders like day traders or can be days or weeks for long-term traders and investors.
Interpreting advance – decline line is also easy. When the market and the A-D line are in same direction (eg: market up and A-D up), the market movement is strong; and when the market and the A-D line are in different direction (eg: market up and A-D down), then the movement is weak. There are many technical analysis tools which combine other market parameters like volume, high and low values, price, etc with advance–decline index to get enhanced results.
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For easy interpretation, advance – decline index is often plotted on a chart called ‘advance – decline line’. The values for each point is calculated by the formula
A-D index = (No. of Advancing stocks – No. of declining stocks) + A-D value of previous period.
The period can be 30 minutes or 1 hour for short-term traders like day traders or can be days or weeks for long-term traders and investors.
Interpreting advance – decline line is also easy. When the market and the A-D line are in same direction (eg: market up and A-D up), the market movement is strong; and when the market and the A-D line are in different direction (eg: market up and A-D down), then the movement is weak. There are many technical analysis tools which combine other market parameters like volume, high and low values, price, etc with advance–decline index to get enhanced results.
NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage
posted by Daniel Pipitone at
7:40 AM
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