Advance Decline Line
Type
Market indicator, trend follower
Short introduction
The Advance Decline Line is an overall market indicator, i.e. several values (index/index composition) are analyzed rather than a single value. The market indicator "Advance Decline Line (ADL)" determines whether the majority of the securities contained in a set of securities rise or fall over a definable period of time.
Statement
The Advance Decline Line compares the number of rising securities with the number of falling securities in order to make a positive or negative statement about the observed market. If the number of rising prices predominates, the indicator rises; if the number of falling prices predominates, it falls.
Formula/calculation
then ADL =ADLt-1 + 1
is ∑WP (Close >Closet-n) < ∑WP (Close <Closet-n)
then ADL = ADLt-1 - 1
∑WP (Close >Closet-n) = ∑WP (Close <Closet-n)
then ADL =ADLt-1
Interpretation
If the Advance Decline Line rises, a positive trend can be seen for the market and period under review. Conversely, a negative market trend can be seen when the Advance Decline Line falls. If the level remains unchanged, the market will remain neutral.
If the Advance Decline Line rises over a longer period of time, this can mean that the market is overvalued and result in falling prices.
Default setting
- Period: 1
Basic trading systems
- None