BREADTH INDICATOR
Back to GlossaryDefinition
A market breadth metric that measures the number of advancing vs. declining securities.
Summary
A breadth indicator is a technical analysis tool that helps investors understand the overall health and direction of the stock market by comparing how many stocks are rising versus falling. Instead of just looking at major stock indices like the S&P 500, breadth indicators give you a broader picture by counting individual securities that are advancing (going up in price) against those that are declining (going down). This helps determine whether a market move is supported by widespread participation or driven by just a few large stocks.
Usage Context
Essential for understanding market analysis, technical analysis coursework, portfolio management decisions, and learning to identify market tops and bottoms through divergence analysis.
Common Confusions
- Thinking breadth indicators are the same as price indices
- Assuming that rising indices always mean broad market strength
- Confusing breadth indicators with volatility measures
- Believing breadth indicators can perfectly time market entries and exits
- Not understanding that breadth can diverge from major market indices
