Advance Decline Ratio (ADR)

Trading with ADR involves the following signals:

ADR rising and so does the price — healthy trend.
ADR falling and so does the price — healthy trend.
ADR reading diverge from the price — trend may change.


ADR crossing above 1.00 level — an uptrend has been established.
ADR crossing below 1.00 level — a downtrend has been established.


The further ADR moves from 1.00 level the more mature current trend is.


ADR Details


What is Advance Decline Ratio in Forex


Advance Decline Ratio in Forex determines a momentum in the market by comparing advancing moments to declining ones.


A/D Ratio was brought from stock trading, where traders were calculating the difference between stocks listed on the New York Stock Exchange that advanced in price minus those that declined.


Example of how it looked in stock trading:


Date Advancing Declining A/D Ratio
01/25/10 2455 2280 -425
01/26/10 2341 2115 -226
01/27/10 2120 1968 152


ADR indicator Formula


The Formula for Advance Decline Ratio is:


Advance/Decline Ratio = Number of advancing moments / Number of declining moments


If ADR is less than 1 it means that there is more declining moments than advancing. If ADR is higher than 1 – advancing moments prevail.


Advancing moments - the number of bars that closed above their opening price.
Declining moments - the number of bars that closed below their opening price.


How to use Advance Decline Ratio indicator


ADR indicator is used widely as a overbought / oversold indicator where extremely high reading suggest the market being overbought while extremely low readings suggest an oversold market. However, the market can remain in overbought/-sold condition for an extensive period of time, therefore an additional confirmation signal from other tools is needed to confirm a move.


Similar to all other momentum indicators the cross of 1.00 level on ADR indicator is an important signal of an established trend while the distance from this 1.00 level describes maturity of the trend.


ADR chart example


On a Forex chart Advance Decline Ratio (ADR) indicator looks more like Advance Decline Line (ADL), but in contrast to ADL, ADR cannot be negative.



How does ADR works on practice


Let’s take a down trending market. By looking at ADR traders can measure a strength and health of a current down trend. If ADR is low and decreasing during the sell off it indicates a good health of the downtrend. If, however, ADR moves higher while the trend continues down, it suggest a deteriorating strength of a trend, in other words with each downside progress fewer participants take part in driving prices down. Eventually the market is going to change the direction and move higher following ADR indicator.

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Posted By jeffboston : 31 August, 2020
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Alerts for each individual pattern can be turned on or off as well.   It also has the option to set a separate color for each pattern.   Note: Of the 3 indicators listed on this page, this is the only one that allows you to assign a separate color to each candlestick pattern.   It uses abbreviated labels, which keeps the chart less cluttered, and includes an onscreen legend to help you identify each pattern that is highlighted.   Sounds good, right? So… what’s the problem?   Actually, there are several problems with this indicator that kept me from ranking it higher.   For instance, the indicator doesn’t identify the morning star or evening star patterns (including the doji star patterns which are the same thing) for some reason.   This indicator also seems to think almost anything with a long wick is a shooting star or hammer, regardless of how large the real body is.   It also doesn’t identify the hanging man or inverted hammer, although this is by design. 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So why am I not recommending this indicator?   There are several serious problems with this candlestick pattern indicator that keep me from ranking it higher.   For instance, it considers the inverted hammer, hanging man, dark cloud cover, bullish piercing, and other weak to moderately strong patterns to be strong reversal patterns (which they are not).   Earlier, I mentioned that you can’t turn each pattern on or off individually, which means you’re stuck with this mix of strong and weak patterns no matter what you do to the settings.   If you’re new to candlestick trading, this could be confusing.   Just like the last indicator mentioned, this one also identifies candlestick patterns out of context, although it does a better job at identifying hammers and shooting stars.   Add to the fact the chart is already crowded, because the indicator has no option to use abbreviated labels, the labels also crowd the candlesticks that they’re identifying (see the image above).   This can make it difficult to, for instance, measure from the high or low of a candlestick using the measuring tool.   You also get random candlesticks with just an arrow and no label from time to time (see the image above – bottom right).   #1 Nison Candle Highlighter This is the only indicator that I can recommend for identifying candlestick patterns. I believe it is, by far, the best candlestick pattern indicator for MT4.   Update: You can now read my full Nison Candle Highlighter review for more information about this indicator.   Steve Nison is THE authority on candlesticks. He is responsible for introducing Japanese candlestick trading to the Western world.   The Nison Candle Highlighter is designed to identify 28 candlestick patterns according to Steve’s own specifications, so you know the patterns are accurate.   It has the ability to turn each individual candlestick pattern on or off, so you can focus on just the patterns that you’re interested in trading.   You can use full or abbreviated labels (pictured below), so you can keep your charts uncluttered.   The sales page has a legend that you could reference or print out if needed, although the abbreviated labels are pretty self-explanatory.   Example: -E = bearish engulfing pattern and +E = bullish engulfing pattern.   This is the most logical and elegant abbreviation system that I encountered while I was testing these candlestick pattern indicators.   As you can see from the image above, the labels don’t crowd the candlesticks either.   Okay, so enough about labels. How well does it identify candlestick patterns?   For starters, it actually identifies all 28 patterns that it’s designed to identify.   The Nison Candle Highlighter accurately identifies each candlestick pattern, as you might imagine, but it also identifies each candlestick pattern within the proper context of the market.   In other words, it won’t identify a hammer (bullish reversal pattern) after a bullish price movement. None of the other indicators that I tested could do that.   Of course, it’s not perfect.   For instance, if you look at the chart above you can see a couple of engulfing patterns that were nothing more than a small real body candlestick engulfing a doji or spinning top.   Although those are technically engulfing patterns, they aren’t worth considering because their size is so small relative to the previous candlesticks.   Final Thoughts I tested many indicators to find the best candlestick pattern indicator for MT4. 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