The advance-decline line (ADL) is a technical indicator that plots the difference between the number of advancing stocks to declining stocks on a daily.Advance-DeclineLineAtechnicalindicatorthatplotsthedifferencebetweenthenumberofadvancingstockstodecliningstocksonadailybasisHome›Resources›Knowledge›Trading&Investing›Advance-DeclineLineWhatistheAdvance-DeclineLine?Theadvance-declineline(ADL)isatechnicalindicatorthatplotsthedifferencebetweenthenumberofadvancingstockstodecliningstocksonadailybasis.  UnderstandingtheAdvance-DeclineLineTheadvance-declinelineisusedtoshowstockparticipationinamarketriskorfall.Duetothenumberofcapitalization-weightedindicesCapitalization-WeightedIndexTheCapitalization-WeightedIndex(cap-weightedindex,CWI)isatypeofstockmarketindexinwhicheachcomponentoftheindexisweightedrelativetoitstotalmarketcapitalization.Inacapitalization-weightedindex,companieswithlargermarketcapitalizationexertagreaterimpactontheindexvalue.(suchastheS&P500,theDJIADowJonesIndustrialAverage(DJIA)TheDowJonesIndustrialAverage(DJIA),alsoreferredtoas"DowJones”or"theDow",isoneofthemostwidely-recognizedstockmarketindices.,andtheNASDAQComposite),stockswithahighermarketcapitalizationwouldexertadisproportionateeffectontheperformanceofanindex.Assuch,theADLprovidesanindicationtoinvestorsregardingtheparticipationofallstocksinanindexinthedirectionofthemarket.Forexample,ifacapitalization-weightedstockindexrose3%,itwouldbeimportantforinvestorstoknowwhether(1)theriseintheindexwasduetoamajorityofstocksincreasing,or(2)iftheriseintheindexwasdrivenbythestrongperformanceofacompanywithalargeweightontheindex.TheADLcanbeusedtoprovidesuchinformation. FormulafortheAdvance-DeclineLine  Where:AdvancingStocksreferstothenumberofstocksthatincreasedinvalueonadailybasis;DecliningStocksreferstothenumberofstocksthatdecreasedinvalueonadailybasis;andPreviousNetAdvancesreferstothenetamountofadvancinganddecliningstocksonadailybasis. Tofullyunderstandhowtheadvance-declinelineiscalculated,anexampleisillustratedbelo