Advance–decline line

The advance-decline line is in financial analysis a trend indicator chart analysis of the total market. The AD line is calculated as a time series of cumulative daily imbalances between the number increased and the number of fallen stock.

The AD line is used as a complement to the analysis of trends using trend lines. The weighting of the shares in the market plays no role in the calculation. So the AD curve shows the quantitative development of a market or market segment, while a weighted stock index reflects the value of the market development. For example, can also rise if the majority of the stocks in the index already falling stock indices. This is possible if some of the stock index is relatively high weighted stocks continue to rise and offset the price decline of the remaining values ​​thus.

Interpretation

In addition to the information about the width of a market movement allows for a comparison of the parallelism of the course of AD line and the market index conclusions about a trend or confirmation of a trend reversal. Both values ​​developing in parallel, so the AD line is to be interpreted as confirming the direction indicated by the index trends. On the other hand course the price performance of the Index and the development of the AD line from one another is to expect a trend reversal.