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Technical Analysis, Studies, Indicators:
Advance/Decline Percentage Oscillator

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The negative side of this formula is that the A/D Ratio has logarithmic scaling from zero (when advances = 0) to infinity (when declines = 0) with center line at 1 (when advances = declines). This should not be a problem when a trader analyzes advancing and declining stocks of the NYSE, yet, in case of a small basket of stocks such as DJI (Dow Jones Industrials) very often we may see a situation when A/D Ratio reaches zero or infinity (either declines or advances are equal to zero).

To avoid a situation when the A/D Ratio would run towards infinity our team has developed and implemented a new technical indicator Advance/Decline Percentage Oscillator (A/D PO) in September 2008. We are the first who introduced this indicator to the world and at the current moment we are the only company that provides this indicator and we consider ourselves this indicator developers.

The A/D PO has the same meaning and analyzes the ratio between the advances and declines. The difference between A/D PO chart and A/D Ratio chart (with similar chart setting) is barely noticeable. Yet, it allows to analyze the A/D Ratio results in the percentage scale from -100% to +100%.

Below you may see formulas used in A/D Percentage Oscillators.

Advance/Decline Issues Percentage Oscillator:

Advance/Decline Volume Percentage Oscillator:

Advance/Decline Momentum Volume Percentage Oscillator:

New Highs/Lows Percentage Oscillator:

From the formulas above you may see that

• if Declines = 0 then A/D PO = 100%
• if Advances = 0 then A/D PO = -100%
• if Advances = Declines then A/D PO = 0
• when advances are dominant PO is positive and when declines are dominant PO is negative

Below you may see the chart of the A/D Issues Ratio and A/D PO.

Chart 1: DJI index - A/D Issues Ratio and A/D issues PO

As you may see the Advance/Decline Percentage Oscillator looks exactly as Advance/Decline Ratio with the only difference in scaling. The same technical analysis that is applied to A/D Ratio could be applied to A/D PO: as confirmation indicator and to predict trend reversal.

If the A/D PO moves along with the price MA (Moving Average) then technical analysis tells that this confirms the trend.

The divergence of the A/D PO movement and price trend could be used to anticipate possible changes in the market trend. The "Buy" signal could be generated when A/D PO starts to advance after a decline and "Sell" signal when A/D Po starts to decline after being in advance. The same principles of the SBV simple trading system could be applied to Advance Decline Percentage Oscillator.

The same as with other Breadth indicators the A/D PO could be applied to the basket of stocks only - it could be used to analyze indexes (Nasdaq 100, S&P 500, DJI, NYSE and other). The index analysis could be used to trade index derivatives, such as QQQQ, DIA and SPY, options on indexes, index e-mini futures, options on index derivatives as well as it could be used to trade stocks from the index basket that moves along with their index.

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