Market Breadth

What is Market breadth? 

Market breadth is a ratio that compares the total number of rising stocks to the total number of falling stocks.

How it works/Example? 

Market breadth, or stock-market breadth, is used in technical analysis to measure the general direction of the stock market based on all traded stocks. Market breadth divides the number of stocks that have experienced gains by the number of stocks that have experienced losses.

• A ratio greater than one (Market Breadth > 1) indicates overall stock market gains or a bullish sentiment. 

• By contrast, ratios less than one (Market Breadth < 1) indicate overall losses or a bearish sentiment.

Example of Market Breadth


For example, suppose that on a given business day, 1,500 stocks experience gains and 1,300 stocks experience losses. The market breadth for that day would be expressed as follows:

1500 Rising Stocks/1300 Falling Stocks = 1.153

With a market breadth of 1.153, the stock market would be said to have experienced overall gains.

Significance of Market Breadth

Market Breadth tells you immediately the strength and direction of a move in the market. A market in which more stocks are going up compared to going down and more stocks making new high compared to new low is a good bull market. Extreme Breadth is often indicator of exhaustion and such zones lead to reversal. Tops and bottoms are also formed due to breadth divergence. If a move keeps going up but breadth does not increase then that is divergence. Such divergences typically result in failure of the move.