The Advance Decline Line (ADL) is a powerful indicator that helps traders gauge the strength of market trends. It’s particularly useful for spotting potential reversals in direction.
Here are two key parameters you can tweak when using the ADL:
- Period - This sets the timeframe for your calculations.
- Cumulative - This option uses accumulated values over the specified Period for a more comprehensive analysis.
The ADL relies on two components of candlesticks over a given timeframe: the positive and negative values. The indicator calculates the difference between these two components. If you choose the cumulative algorithm, the ADL value from the previous bar is added to the current result, giving you a clearer picture of market trends.
Fig.1. ADL with the accumulative calculation algorithm
Fig.2. ADL without the accumulative calculation algorithm
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