Glossary
Advance-decline line
A running total of advancing minus declining stocks each day, used to check whether an index move is broadly supported.
On this page
The advance-decline line (A/D line) is a breadth indicator that adds up, day after day, the number of stocks that rose minus the number that fell on an exchange or within an index. It answers a question a price index cannot: is a rally or a decline being driven by most stocks, or by a handful of giants? That matters because cap-weighted indexes such as the S&P 500 can be pulled up by a few large companies while the typical stock goes nowhere.
How it is calculated
Each day you take net advances and add them to the previous day's value. The starting point is arbitrary, so only the line's direction and shape matter, not its level.
How it is read
- Confirmation. When the index and the A/D line both make new highs, the advance is broad.
- Divergence. When the index climbs to a new high but the A/D line does not, fewer stocks are participating. Technicians treat that as a warning that the rally is narrowing, though such divergences can persist for months before anything happens.
A practical caveat: on the NYSE, many listed issues are closed-end funds, preferred shares and other interest-rate-sensitive securities, which can distort the line. Some analysts prefer a common-stocks-only version for that reason.