Advance Decline Index

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Definition: Advance Decline Index



Full Definition of Advance Decline Index


The Advance-Decline Index is an indicator that represents the total difference between the number of advancing and declining security prices for a given stock exchange. Typically, the advance-decline figures come from the NYSE (or Nasdaq) on a daily basis (see Yahoo advance decline).  When plotted on a chart this indicator is known as the Advance-Decline Line.

The Advance/Decline Index is calculated by accumulating the difference between the number of advancing issues and the number of declining issues over time.

Application of Advance/Decline Index

When more stocks are advancing than declining, the Advance-Decline Index moves up indicating stock market strength.  Conversely, when more stocks are declining than advancing, the Advance-Decline Index trends down, indicating stock market weakness.

Note that the number of stocks trading on a particular market varies over time. Thus there is no consistent maximum or high value.  By studying the trend of the Advance-Decline Index it can be established whether the market is trending, and how long the current trend has prevailed.

Another way to use the Advance-Decline Index is to look for a divergence between the stock market index and the Advance-Decline Index.  Often, an end to a bull market occurs when the Advance-Decline Index trends sideways or down while the stock market index is still making new highs.

A divergence between the Advance-Decline Index and the stockmarket index often predicts trend change.


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Definition Sources


Definitions for Advance Decline Index are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 22nd March, 2020 | 3 Views.