Absolute Breadth Index (ABI) is one Forex Technical Indicator used in Technical Analysis. It counts the difference between advancing and declining issues. After that, it gives direction about which price are moving.

This indicator also can be used to determine the volatility levels in the market, but without factoring in price direction. You can calculate this indicator by take the absolute value of the difference between the number of advancing issues. Large numbers means the volatility is increase, that can cause significant changes in prices in the upcoming weeks.

If this indicator shows high values, it means market activity and possible changes. If this indicator shows there is low value means that no changes take place.

Fosback also found that the high values usually lead to higher prices 3-12 months later. The most common way of the use of the absolute breadth index is the divide of the weekly ABI throughout the issues traded on the market. If after 10 weeks moving average is calculated and readings are less than 15% called it “bearish”. Readings higher than 40% are considered “bullish”.

Related Articles

From Investopedia
Major financial newspapers and magazines and investment television programs often refer to market breadth as the difference between advancing and declining issues. (full article)

From Forexrealm
The Absolute Breadth Index counts the difference between the advancing and declining issues and gives up the actual direction in which prices are moving. (full article)