✔️ Information reviewed and updated in December 2023 by Eduardo López
Indicators are tools that can help us forecast the movements of any type of cryptocurrency. Today, most trading platforms and companies use Advance Decline Line to value participation within a certain market or stock index.
Knowing what the direction of prices will be in trading is not as easy as it seems, it is important that before starting to invest we know what tools we have at our disposal to be able to make the best decisions that do not affect our investments.
➡Definition of Advance Decline Line✨
Advance Decline Line is a technical analysis tool that shows the difference between the number of stocks that advance and the number of stocks that decline daily.
This indicator is considered cumulative, if it has a positive number it is added to the previous number, and if it is negative it is subtracted. In other words, the last value of this indicator corresponds to the previous value, adding the number of values that have risen and subtracting the number of values that have decreased.
➡What is Advance Decline Line for? ✨
The A / D line shows what the market sentiment is, telling investors how many stocks have risen and how many have fallen. It is used daily or in 5-minute bars, and it serves to confirm the trend of the prices of the main indices, as well as it can warn of the reversals that exist when a divergence occurs.
This indicator measures the direction the market is in, and is typically compared to the benchmark. When the Advance Decline Line indicator and the index move in the same direction, the trend is usually more likely to continue.
However, when the index reaches its maximum without the indicator accompanying it, then a trend reversal can be found.
➡How is it obtained? ✨
To obtain it, you have to calculate the difference between the number of shares that have risen and the number of shares that have fallen at the end of a period, in this case it can be one day. This result is known as net advance, which is the first value of our indicator.
To know the next value of our indicator, the net advance to the period is subtracted if the value is negative, and if the value is positive then it is added. These steps are constantly repeated.
➡Reasons to use it✨
This indicator is very important to confirm market movements or trends, and is widely used by traders and financiers.
Through Advance Decline Line it is possible to have a sufficiently objective criterion of what is happening in the market, without relying solely on what financial articles say. Many use it only as support to confirm the signals of other indicators or strategies.