Modified Advance–Decline Line: Volume-Weighted Trend and Divergence Signals
Summary
The modified Advance–Decline Line (MADL) is presented as a trend-strength indicator that uses price movement within each bar and tick volume, adjusted by a moving average of volume over a configurable period. Its value accumulates from the previous reading, so the indicator tracks changes over time rather than standing alone as a price level.
The document interprets a rising price with a falling MADL as a possible reversal warning, while matching price and indicator direction is described as evidence of a strong current trend. It cautions that divergence is not a timely or certain reversal signal and can persist for a long time. The text provides the formula and qualitative interpretations but offers no empirical tests, performance results, or guidance for selecting the period or turning signals into trades.
Key ideas
- MADL accumulates a bar-based price position measure weighted by volume and its period moving average.
- The indicator has one configurable input: the period used to calculate the volume moving average.
- Price and MADL moving in opposite directions may warn of a reversal.
- Matching price and indicator directions are interpreted as confirmation of trend strength.
- Divergence can persist, so it does not establish that a reversal is imminent.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.