The Advance-Decline Line (ADL) is a key market breadth indicator that tracks the number of advancing versus declining stocks over time. Rather than focusing solely on price, the ADL provides a deeper look into how broadly a market move is being supported—a valuable insight when evaluating the strength or weakness behind rallies and sell-offs.

How It Works
Each day, the ADL takes the difference between advancing and declining stocks, and adds it to the previous day’s ADL value.
This creates a cumulative line that rises or falls depending on how many stocks are participating in a move.

How to Interpret It
Rising ADL: Suggests broad market participation—a healthy and sustainable rally
Falling ADL: Indicates declining participation—a broad-based selloff or internal weakness
Divergences: If the index is rising but the ADL is falling, it could signal a weakening rally with fewer stocks driving the gains, potentially leading to a reversal

How to Use It in FX Replay
Use the ADL to confirm trends detected by price action or other indicators
Look for divergence between price and ADL to spot possible trend exhaustion or reversal setups
Combine with volume-based tools or momentum indicators to strengthen your backtesting logic

Related Tools
Advance-Decline Ratio (ADR): Compares the total number of advancing to declining stocks
Advance-Decline Volume Percent: Measures volume participation across advancing vs. declining stocks
Want help layering ADL with other breadth or confirmation tools in your backtests? Let me know and I’ll walk you through it.

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