Advance Decline Ratio

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Definition: Advance Decline Ratio

Advance Decline Ratio

Quick Summary of Advance Decline Ratio

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.

Full Definition of Advance Decline Ratio

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).

Advance/Decline Ratio Calculation

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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Modern Language Association (MLA):
Advance Decline Ratio. Payroll & Accounting Heaven Ltd.
March 31, 2023
Chicago Manual of Style (CMS):
Advance Decline Ratio. Payroll & Accounting Heaven Ltd. (accessed: March 31, 2023).
American Psychological Association (APA):
Advance Decline Ratio. Retrieved March 31, 2023
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Definition Sources

Definitions for Advance Decline Ratio 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: 20th November, 2021 | 0 Views.