Advance/Decline
Indicator guide
The Advance-Decline Line (ADL) is a key market breadth indicator that tracks the number of advancing versus declining stocks over time. Rather than focusing solely on price, the ADL provides a deeper look into how broadly a market move is being supported—a valuable insight when evaluating the strength or weakness behind rallies and sell-offs.
The Advance-Decline Line (ADL) is a key market breadth indicator that tracks the number of advancing versus declining stocks over time. Rather than focusing solely on price, the ADL provides a deeper look into how broadly a market move is being supported—a valuable insight when evaluating the strength or weakness behind rallies and sell-offs.
How It Works Each day, the ADL takes the difference between advancing and declining stocks, and adds it to the previous day’s ADL value. This creates a cumulative line that rises or falls depending on how many stocks are participating in a move.
How to Interpret It Rising ADL: Suggests broad market participation—a healthy and sustainable rally Falling ADL: Indicates declining participation—a broad-based selloff or internal weakness Divergences: If the index is rising but the ADL is falling, it could signal a weakening rally with fewer stocks driving the gains, potentially leading to a reversal
How to Use It in FX Replay Use the ADL to confirm trends detected by price action or other indicators Look for divergence between price and ADL to spot possible trend exhaustion or reversal setups Combine with volume-based tools or momentum indicators to strengthen your backtesting logic
Related Tools Advance-Decline Ratio (ADR): Compares the total number of advancing to declining stocks Advance-Decline Volume Percent: Measures volume participation across advancing vs. declining stocks Want help layering ADL with other breadth or confirmation tools in your backtests? Let me know and I’ll walk you through it.