The Advance/Decline
Ratio (aka "A/D Ratio") is the number of advancing issues divided
by the number of declining issues. This makes it similar to the
Advancing/Declining Issues - it shows market breadth (strength).
The fact that a division is used, however, makes it independent
of the NUMBER of issues in total (which has increased steadily over
the years). Often, a moving average of the A/D Ratio is used to
indicate an overbought/oversold condition - high values mean a rally
is 'overdone' and likely to correct. In the same way, low readings
mean an oversold market with a rally on the way. If you think this
is therefore a valuable free day trading indicator, you may be wrong,
as markets can (to quote) "remain irrational far longer than you
can remain solvent". SureFireThing Camarilla Equation (original) users
need nothing more than the L3 levels to trade these conditions.
Should you wish, you can calculate the A/D Ratio by dividing the
number of stocks that advanced in price on the day by the number
of stocks that declined on the same day.
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