Business, Legal & Accounting Glossary
An often quoted technical indicator that measures market breadth. The A/D ratio is calculated by dividing the number of advancing issues by the number of declining issues, with a ratio of 1 to 1 reflecting a neutral bias in the broader market. Technicians interpret any ratio that indicates that advances outnumber declines (2 to 1) as evidence of an overall bullish sentiment. Conversely, a technician would see a market in which declining issues outnumber advancing issues as having a bearish bias. Like the advance/decline line (A/D or AD), the periodicity in which an investor calculates the A/D ratio can vary from every few minutes (intraday) to daily, weekly or longer.
The Advance/Decline Ratio is the ratio of the number of advancing issues to declining issues for a given stock exchange such as the NYSE or Nasdaq.
The Advance/Decline Ratio is similar to the Advance/Decline Index in that it displays market breadth.
But, where the Advance/Decline Index calculates the difference between the number of advancing and declining issues, the Advance/Decline Ratio divides the values.
The Ratio, unlike the Advance/Decline Index, remains constant regardless of the number of issues that are traded on the New York Stock Exchange (which has steadily increased).
The Advance/Decline Ratio is calculated by dividing the number of advancing issues by the number of declining issues on a specific day or time period.
A moving average of the Advance/Decline Ratio is often used as an overbought/oversold indicator.
The higher the value, the more “excessive” the rally and the more likely a correction. Likewise, low readings imply an oversold market and suggest a technical rally. Day-to-day fluctuations of the Advance/Decline Ratio are often eliminated by smoothing the ratio with a moving average.
Advance/Decline Ratio is an overbought/oversold indicator.
Not all charting sites support advancing and declining issues.
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This glossary post was last updated: 20th November, 2021 | 0 Views.