InvestorQ : Are there any technical chart indicators for breadth of markets?
priya Shah made post

Are there any technical chart indicators for breadth of markets?

natasha Samani answered.
3 years ago

In technical analysis there are varieties of indicators that are referred to as the Breadth of Market Indicators. As a trading rule, this is extremely important for traders and investors because you are always safer when you are on the side of the market breadth. The chances of being caught out in the cold are extremely low. Market breadth is more relevant when you are holding mid-cap stocks because the liquidity in such stocks can vanish quite fast. Essentially, market breadth indicates two things. Firstly, it indicates the broad based participation of a rally. Secondly, it indicates that apart from large institutions, small retail investors and HNIs are also actively participating in the market. That is conclusive evidence of market breadth.

But breadth of market has also another very important role to play. For the more aggressive investors, market breadth is an important indicator of the turnaround in the market. Once a trend is identified, the entire market tries to pile on. Identifying market breadth shifts around the turnaround helps an investor tweak his investment strategy accordingly. It is said prices, volumes; news flows can all be misleading as it is controlled by a few players. But breadth is something a handful of traders can never control. Which is why, market breadth become so critical. In fact if you want to be the early bird that gets the worm in the market, then breadth of market is a very useful breadth indicator and sets the tone for the sustainability of any rally.