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The Advance/Decline Line ("A/D Line") is used to measure market breadth, being a cumulative total of the Advancing/Declining Issues indicator. Breadth in this case means a market's strength.When more trading stocks are advancing than declining, the A/D Line moves up otherwise down. The A/D Line may be a better visual indicator of a markets direction than more traditional measures (such as the S&P Index, for example), giving a better visual clue as to the market's trend, and how long it has been trending. As an indicator used in day trading it is obviously of little use, as it functions best on a far longer timescale. Often, divergences between the A/D line and a market signal the end of a trend - the A/D changing BEFORE the underlying market. The numeric value of the A/D Line is less important than its slope and pattern. |
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