What Is the Advance-Decline Ratio (ADR)?
The advance-decline ratio (ADR) is a market breadth indicator that compares the number of securities that closed higher to those that closed lower over a given period.
Definition
The advance-decline ratio (ADR) is a market breadth measure used in technical analysis to compare the number of advancing securities with the number of declining securities. It is calculated by dividing advancing issues by declining issues.
The ratio provides a numerical view of how broadly price movements are distributed across the market.
How It Works
The ADR is calculated by taking the number of stocks that closed higher than the previous period and dividing it by the number that closed lower. The result is expressed as a ratio rather than an absolute count.
The ratio can be calculated over different timeframes, such as daily, weekly, or monthly, and may also be observed over time to assess changes in market participation.
Why the Term Matters
The advance-decline ratio helps explain whether market movement is supported by many securities or driven by a smaller group. It provides context about overall market participation rather than price direction alone.
As a breadth indicator, it is often used to describe market momentum and internal market conditions.
Related Concepts
- Market breadth
- Advance-decline line
- Moving average
- Market momentum
- Overbought conditions
- Oversold conditions
FAQs
What is the advance-decline ratio (ADR)?
The advance-decline ratio is a market breadth indicator that compares advancing securities to declining securities.
How is the advance-decline ratio calculated?
The advance-decline ratio is calculated by dividing the number of advancing stocks by the number of declining stocks.
What does a high advance-decline ratio indicate?
A high advance-decline ratio indicates that more securities are advancing than declining.
What does a low advance-decline ratio indicate?
A low advance-decline ratio indicates that more securities are declining than advancing.
Can the advance-decline ratio be tracked over time?
Yes, the advance-decline ratio can be analyzed over time to observe changes in market participation and momentum.
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