Advance/Decline Ratio [ADRatio]

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The Advance/Decline Ratio function determines the momentum of the market by calculating the ratio of advancing issues to declining issues. Parameters ------------------ Advancing Issues     The number of issues (securities) that closed above their opening price. Declining Issues       The number of issues (securities) that closed below their opening price. Note that while this function is intended for use with these specific values, any values can be used for these parameters, including preprocessed values or values for a subset of the market. Indicator Value ------------------------ The Advance/Decline Ratio is calculated by dividing the number of advancing issues by the number of declining issues. This indicator is typically smoothed with a moving average to filter out day-to-day fluctuations and display longer term trends. Usage ----------- The Advance/Decline Ratio is useful for determining the momentum of the market. Values over 1 are generated when more stocks are advancing (increasing in price) than declining. Values less than 1 are generated when more stocks are decreasing in price. It differs from the Advancing-Declining Issues indicator in that the scale of values remains more consistent. This indicator makes a good overbought/oversold indicator for the market. Extremely high values may indicate that the market is becoming overbought, meaning that a sell-off may occur in the near future causing prices to drop. Likewise, extremely low values can indicate that the market is becoming oversold. In general, broad market indicators can be used for trading against broad market indices through options, futures, and mutual funds. They can also be used to increase the effectiveness of more specific signals by adding confirmation or warning of upcoming trends. Source ------------ This indicator is based on an entry in "Technical Analysis From A To Z" by Steven B. Achelis.