Advance / Decline (A/D) Line is one of the favourite indicator used in Forex Technial Analysis. This indicator can be used as a gauge of the market breadth. This indicator can plots changes in the value of the advance-decline price over a certain time period.

When we talking about this indicator, many people will ask the formula of it. The A/D Line formula is :

A/D Line = (# of Advancing Price - # of Declining Price) + Previous Period’s A/D Line Value

The Advance/Decline Line (A/D Line) is a very efficient measure of the market’s strength. It is used by many traders to confirm the strength of a current trend and its likelihood of reversing.

If the markets are upwards but the A/D line is move downwards, it’s usually a sign that the markets are losing their breadth and it can be setting up to head in the other direction. If the slope of the A/D line is upwards and the market is trending upward then we can say the market is healthy.

The concept of the Advance/Decline line is to have a broad measure of daily changes in supply and demand. Many people often smooth the data using moving averages of the changes in advancing issues and declining issues in order to get a more accurate picture of changing trends in supply and demand.