The Advance/Decline Ratio is the ratio of the number of advancing issues to declining issues for a given stock exchange such as the NYSE or Nasdaq.
The Advance-Decline Ratio is the ratio of the number of advancing issues to declining issues for a given stock exchange such as the NYSE or Nasdaq. The Advance-Decline Ratio is similar to the Advance-Decline Index in that it displays market breadth.
But, where the Advance-Decline Index calculates the difference between the number of advancing and declining issues, the Advance-Decline Ratio divides the values. The Advance-Decline Ratio, unlike the Index, remains constant regardless of the number of issues that are traded on the New York Stock Exchange (which has steadily increased).
Advance-Decline Ratio Formula
The Advance-Decline Ratio is calculated by dividing the number of advancing issues by the number of declining issues on a specific day or time period.
Application of Advance-Decline Ratio
A moving average of the Advance-Decline Ratio is often used as an overbought/oversold indicator. The higher the value, the more "excessive" the rally and the more likely a correction. Likewise, low readings imply an oversold market and suggest a technical rally. Day-to-day fluctuations of the Advance/Decline Ratio are often eliminated by smoothing the ratio with a moving average.
Long term historical data for the NYSE, AMEX and NASDAQ can be found at Advances and Declines. The web site provides advances, decliners, unchanged and associated volumes back to 1965.