Breadth Indicators

What is it?

Breadth indicators generally show the amount of participation in the movement of a stock market. It can be used to answer the question ‘how broad is the rally or sell-off?’.

By evaluating how many stocks are increasing or decreasing in price and how many trades investors are placing for these stocks, breadth indicators can be used to show the following:

  • overall market sentiment – whether it’s bullish (positive market breadth) or bearish (negative market breadth)
  • evaluate the behaviour of a particular industry or sector
  • analyse the magnitude of a rally or fall

How is it calculated?

A mathematical formula that uses advancing and declining issues on a given day or as a moving average. Many measurements are used: advances divided by declines, as a percentage, advances minus declines as a net positive or negative number.

Breadth Indicator Examples

There are several different types of breadth indicators such as the follow:

  • NYSE advance-decline line
  • absolute breadth index
  • Arms index
  • Force Index
  • Chaikin oscillator
  • up/down volume ratio
  • up/down volume spread
  • on-balance volume
  • cumulative volume index