Skip to main content

Advance/decline ratio (ADR)

Advance-decline ratio (ADR) is a typical market-breadth indicator used in technical analysis. Advance-decline ratio (ADR) contrasts the proportion of equities that closed higher with the proportion that closed lower than their closing prices from the prior day. To get the advance-decline ratio, divide the number of advancing shares by the number of sinking shares.


Using the ADR: A Quick Explanation
To determine if a small number of stocks are responsible for the market's overall success, investors can check the advance-decline ratio's (ADR) moving average against market index performance like the Nasdaq or the New York Stock Exchange. Using this contrast can help shed light on the underlying factors that may be driving an apparent price increase or decrease. Oversold markets are often characterized by a low advance-decline ratio, whereas overbought markets are marked by a high ratio. In this way, the ratio of advances to declines might serve as an early indicator of a market trend reversal.
Knowing when to take advantage of a change in trend is crucial for any technical analysis strategy. The advance-decline ratio is a useful metric for gauging the strength of market momentum and providing early warning of probable trend changes.
The advance-decline ratio provides only the level of advances relative to decreases as a standalone metric, but when combined with other complementing measures, insightful financial analysis is possible. In actuality, it is not customary for traders to rely entirely on the advance-decline ratio.
The ratio of new advances to declines can be computed on a daily, weekly, or monthly basis. Analysts and traders find the ratio form of the measure to be more user-friendly than absolute numbers, such as comparing the number of stocks ending higher with the number of stocks going lower on that day.

Variations on the Success/Failure Ratio (ADR)
The ratio of progress made versus progress lost can be used in two ways. Aside from just looking at the absolute value, you can also analyze the ratio's historical trend. The overbought/oversold status of the market can be deduced from the advance-decline ratio, which is useful when other indicators are unavailable. A look of the ratio's movement over time can shed light on whether the market is experiencing bullish or negative momentum.
If the advance-decline ratio is high in isolation, it could indicate that the market is overbought, while a low ratio would indicate that it is oversold. In the meantime, a ratio that is steadily rising could indicate a bullish trend, while a ratio that is steadily falling could indicate a negative trend.

Popular posts from this blog

What to Do When Market Is in the Toilet? Don't Trade OR Day Trade!

As we all know, 2022 has been a painful year, and it continues to be so. What works during a bearish market are a few strategies: shorts, inverse ETFs, holding cash positions and day trading. Today we take a look at ATXI and see how we day traded it. Watch this video to get the technicals. Good trading! Trading Risk Disclaimer All the information shared is provided for educational purposes only. Any trades placed upon reliance of SharperTrades, LLC are taken at your own risk for your own account. Past performance is no guarantee. While there is great potential for reward trading stocks, cryptos, commodities, options, forex and other trading securities, there is also substantial risk of loss. All trading operations involve high risks of losing your entire investment. You must therefore decide your own suitability to trade. Trading results can never be guaranteed. SharperTrades, LLC is not registered as an investment adviser with any federal or state regulatory agency. This is

Kal's Option Trade of the Week - UNG Short Call Vertical

This week we are going in with the Short Call Vertical strategy on UNG (Natural Gas ETF). The reason for choosing this option trade is that the Natural Gas market has been volatile and on a tear for the last few weeks. As contrarians, we will bet it slows down and turns around from here. Purely my assumption, but you can only trade on your own assumptions. :) Watch this video to get the trade details. Hope you enjoy it! Kal Trading Risk Disclaimer All the information shared is provided for educational purposes only. Any trades placed upon reliance of SharperTrades, LLC are taken at your own risk for your own account. Past performance is no guarantee. While there is great potential for reward trading stocks, cryptos, commodities, options, forex and other trading securities, there is also substantial risk of loss. All trading operations involve high risks of losing your entire investment. You must therefore decide your own suitability to trade. Trading results can neve

Bitcoin and Ethereum Funds: Two Unusual Activities That Could Result in a Big Move

Today we take a look at the technicals for Bitcoin and Ethereum. The crypto market has been quiet for several months.   On Friday we detected unusual dark pool activities (large block orders) in the Bitcoin Trust Fund and Ethereum Trust Fund, GBTC and ETHE respectively. When smart money know something, they place large orders in the dark pool exchanges, away from the public eye. By doing so, they are positioning themselves ahead of the crowds, in order to benefit from move that will follow, once the news or report is made public. However, dark pool activities   do not   tell us the direction of the next move. It only tell us that a large order(s) has been placed. Only a breakout (bullish) about a resistance level, or a breakdown (bearish) below a support level can confirm the direction of the next move. So, what can we expect next? Watch this video to find and to get the technical insights.  Good trading! Trading Risk Disclaimer All the information shared is provided for educational

10+ Stocks To Watch Moving Forward. Here Are the Technicals

Today we focus a several tickers including three swing trades that we initiated just a few days ago: ACCD, RBLX and TDOC. Create a watch list, watch this video to get the technicals, and manage your trades correctly. Featuring ACCD AGEN BBBY CHWY GROV LABU LCID LI MRNA MVIS PINS RAD RBLX RIVN SPCE TDOC Good trading! Trading Risk Disclaimer All the information shared is provided for educational purposes only. Any trades placed upon reliance of SharperTrades, LLC are taken at your own risk for your own account. Past performance is no guarantee. While there is great potential for reward trading stocks, cryptos, commodities, options, forex and other trading securities, there is also substantial risk of loss. All trading operations involve high risks of losing your entire investment. You must therefore decide your own suitability to trade. Trading results can never be guaranteed. SharperTrades, LLC is not registered as an investment adviser with any federal or state regulatory age