Advance Decline Line Indicator Explained Simply & Understandably. // AD A/D A-D breadth nyse - YouTube

Advance Decline Line Indicator Explained Simply & Understandably. // AD A/D A-D breadth nyse strategy tutorial basics david moadel

welcome to looking at the markets with David Modell today I wanted to introduce

to you the ad line which is the advanced decline line it's an indicator so let's

learn about it the ad line or advanced decline line it measures the breath of

participation in the stocks in an index such as the S&P 500 the Nasdaq the Dow

the New York Stock Exchange composite index and so on in other words when the

market goes up is it because a lot of stocks are actually going up and that's

broad participation or is it because only a few stocks are going up a lot

while most stocks aren't going up at all and that would indicate a lack of broad

participation in a healthy and sustainable market it's going up because

most of the individual stocks are advancing or going up not just because a

few stocks are carrying the market higher so let's take a look at the

formula for the advanced decline line they take the number of advancing stocks

they subtract the number of declining stocks and then they add that number to

the previous periods advanced decline line number so basically you get a

running total because you're taking the number of advancers and subtracting the

number of decliners and adding this to yesterday's numbers so it's a running

total when the advanced decline line is going up that indicates that more stocks

are advancing and when the advanced decline line is going down that

indicates that more stocks are declining if the market is going up but the

advanced decline line is going down that is a divergence and could be a bad sign

for the markets you can get you can use it as not your only indicator but you

can get a feel for which way the market might be headed all right so this is

stockcharts.com and what I did was I plotted for the New York Stock Exchange

composite index I put the New York Stock Exchange

composite index itself here at the bottom and then I put the advanced

decline line for the New York Stock Exchange composite index and green above

it right here alright so but also as a reference I put the the index itself

down here in black and we can compare the two and this is for the previous six

months the past six months and as we can see they've pretty much been moving in

tandem moving together I don't see any particular divergences in the past six

months so when they're moving together that's kind of business as usual things

are behaving pretty and normally what I would be looking at for a warning sign a

possible warning sign might be if the stocks or the index itself if the market

was going up with higher high as higher lows that kind of thing or just steadily

going up and meanwhile if the advanced decline line was going down at the same

time if we add this line going up and then the advanced decline line going

down then that might indicate to me that mmm not a lot of stocks are

participating in the rally and so that's not broad participation and that could

be a warning sign so that's something to look out for and it could be the

opposite way to if you have the index or the market itself going down and

meantime at the same time if the if the advant advantage off the same exact time

that might indicate that there could be a turnaround in the making because that

would mean that more and more of the stocks in the index were advancing and

that could lead to the index itself the market itself advancing in the near

future possibly but once again please don't use this as your only indicator

use your common sense do your own research and feel free to use a number

of indicators for formation alright so that is a basic

introduction to the advance decline line the ad line I hope it was helpful to you

feel free to check out all my videos and subscribe to my youtube channel if you

have not done that already I appreciate it and I hope you'll give this video a

thumbs up on YouTube and leave a comment and if you need help with indicators

trading investing putting together a trading plan or an investing plan

because you really need to have one you can contact me anytime my email address

is David Modell that's M Oh a de L at gmail.com thanks a lot I really

appreciate it and I'll talk to you again soon