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Technical Analysis, Studies, Indicators:
Advance Decline
Volume
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Studies
"Declines volume" is the running total (cumulative sum) of the
number of shares traded for all those securities that belong to the declines
group for a given time period. If a particular security is currently trading
below its close the previous trading day, its volume is added to the total
volume of the declines group.
For the definition of "advances volume", simply adapt the above
explanation.
Advances and declines volume can be analyzed using daily
charts (i.e., one bar represents the trading activity of an entire day) or with
intraday charts (one bar reflects the activity of 1, 5, 15, 30, or 60 minutes).
The chart below shows an example of advances volume (in green) and declines
volume (in red).
Chart 1. 5-day
intraday (one bar = 15 min)
Cumulative Advances and Declines Volume (Cumulative AD Volume)
Looking at the charts bottom pane, you may have noticed that
both the advances and the declines volume tend to increase as the trading day
progresses. What we have charted here is the "cumulative advances and declines
volume" ("cumulative AD volume"), a commonly accepted volume indicator among the
majority of technical analysts.
What do we mean by "cumulative AD volume"? For instance, using
the case of cumulative advances volume, we chart the advances volume for each
completed bar, for all the stocks that presently belong to the advances group.
The volume for the advances group is calculated for each completed bar, then
added to the sum total of the volume of all the previous bars. For each new bar,
we are summing up all the previous volume data, going all the way back to the
beginning of trading that day. On a real-time intraday chart, the green line
will reveal the dynamic variations that take place in the advances volume
throughout the day, as they unfold.
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