Advance decline line is a breadth indicator(volume based indicator)
As a breadth indicator, advance decline line is used to show the comparison between the advancing and declining of securities over a given period of time. Just like other volume based indicators,Advance decline line indicator is also based on divergence.
When more securities are advancing than declining,that will be an indication of a positive breadth thus the market will be considered to be in a bullish condition while when less stocks are advancing than declining,that will be an indication of a negative breadth thus the market will be considered to be in a bearish condition.
Advance/decline line is therefore calculated using the following formula;
AD line= (Number of advancing issues- Number of declining issues)+ previous value of AD line
The bullish and bearish cryptocurrency market for advance decline can therefore be explained as follows;
1. advance decline line bullish cryptocurrency
Since advance decline line is based on divergence,it therefore follows that when the market is trending downwards while the Advance decline line is moving upwards,the market will reverse and start moving in the same direction upwards as the advance decline line. This will signal the cryptocurrency trader to purchase a given amount of cryptocurrency with their USDT balance. The cryptocurrency trader can either use the market buy order which will instantly be processed or they can use the limit buy order which will be processed when the market reaches their limit buy order price.This is indicated as from below
The above is the TRX market against USDT. Two points are being indicated. There is point A and point B. Point A is the advance decline line while point B is the divergence point . At point B, the market was moving in a downwards direction while the advance decline line was moving in an upward direction. The market then reversed and start moving in the same direction upwards as the advance decline line thus signaling the cryptocurrency trader to purchase a given amount of TRX with their USDT balance at that point. The trader can decide to place a market buy order which will be executed instantly or they can place a limit buy order which will be processed when the market reaches their limit buy order price. When the order is being processed, the account of the trader will start increasing in value if the market is moving upwards
2. advance decline line bearish cryptocurrency
Since advance decline line is based on divergence,it therefore follows that when the market is trending upwards while the Advance decline line is moving downwards,the market will reverse and start moving in the same direction downwards as the advance decline line. This will signal the cryptocurrency trader to sell a given amount of cryptocurrency which he had previously purchased and is currently holding. The cryptocurrency trader can either use the market sell order which will instantly be processed or they can use the limit sell order which will be processed when the market reaches their limit sell order price.This is indicated as from below
The above is the TRX market against USDT. Two points are being indicated. There is point A and point B. Point A is the advance decline line while point B is the divergence point . At point B, the market was moving in an upward direction while the advance decline line was moving in a downwards direction. The market then reversed and start moving in the same direction downwards as the advance decline line thus signaling the cryptocurrency trader to sell a given amount of TRX which he had previously purchased and is currently holding to avoid declining the value of their account. The trader can decide to place a market sell order which will be executed instantly or they can place a limit sell order which will be processed when the market reaches their limit sell order price. When the order is being processed, the account of the trader will have increased in value in terms of USDT.
cryptocurrency market is a highly volatile market. As a cryptocurrency trader,whenever you place a buy order,always make sure to apply risk management so that whenever your buy order goes against you, your account do not depreciate so much in value.
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