Advance-Decline Line Quick Summary
The ADL is rising and likewise the price – the uptrend is healthy.
ADL is falling and therefore the price – downtrend is healthy.
The deviation between ADL and value – should be expected to change/pause in the trend.
Advance-Decline Line indicator
Advance-Decline Line Indicator is used to identify and confirm the strength of a trend in stock and commodity. As well as the possibility of reversal. ADL indicators in stock provide comparisons. Between the declining and declining market numbers for a fixed period.
Formula Advance-Decline Line
Advance-Decline Line = (N Advancing Issues – En of Declining Issues) + Previous Periods ADL Value
How To Do Business With Advance-Decline Line
In general, if the market is trading upward and the advance-decline line is sliding downwards (deviation). Then it indicates that a current trend is losing its strength and can be reversed soon. If the market is moving upwards and similarly there is an advance-decline line. Then the situation is stable and the current trend is strong.
The deviation that can be seen between the price and the indicator line is only a warning of possible changes to settle. A deviation factor for the ADL indicator can last longer. So the ADL indicator cannot be used as a time indicator.