A tool used confirm that a trend is continuing. If there are more declining issues, the trend might see a reversal in the near future. The Advance/Decline Index is calculated by subtracting the number of declining prices from the number of advancing security prices.

The advance/decline index is a market breadth indicator that represents the cumulative difference between the number of advancing and declining stocks within a given index. A rising A/D index value suggests that the market is gaining momentum, whereas a falling value suggests that the market may be losing momentum.

The advance/decline Index is also called the advance/decline line or the A/D index or line. It is used to help confirm the current stock index trend, or can forewarn of stock index reversals when the A/D index diverges with the stock index direction.

The Formula for the Advance/Decline Index is:

Advance/Decline Index=(Advances−Declines)+PIVwhere:Advances=Total number of stocks in the index thatclosed above their prior closing pricesDeclines=Total number of stocks in the index thatclosed below their prior closing pricesPIV=Prior index value​.

## How to Calculate the Advance/Decline Index

1. Tally the number of advancing stocks at the end of the trading session.
2. Tally the number of declining stocks at the end of the trading session.
3. Subtract the declines from the advances.
4. If step three is negative, deducted the number from the Prior Index Value. If step three is positive, add it to the Prior Index Value.
5. When calculating for the first time, use the value from step three only (since there is no Prior Index Value). This is then used as the Prior Index Value on the next trading day.
6. Repeat steps one through four daily.