Business, Legal & Accounting Glossary
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: 23rd March, 2020 | 3 Views.