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When people get obsessed with whether the S&P 500 is green or red on the day, they miss what actually matters most — participation.
I care more about how many stocks are participating in a move than what the index is doing. That’s market breadth. And when you learn to read it, it’ll change how you trade.
I’m not talking about predictions or opinions. I’m talking about using actual data to know if the move you’re seeing is legit — or hollow. It’s one of the most overlooked tools in the market.
You don’t need 15 different signals. Keep it simple.
I look at the advance/decline line — how many stocks are advancing vs. declining each day. If the indexes are rising but the A/D line is falling, that’s a warning.
Another one is new highs vs. new lows. If the market is pushing higher but you’re seeing fewer names making new highs, that tells you leadership is narrowing.
And finally, the percentage of stocks above key moving averages — like the 50- or 200-day. I use this to see how strong participation really is. If only 30% of stocks are above their 50-day, I’m not chasing breakouts — I’m dialing risk back.
Market breadth tells me when to trust the move — and when to doubt it. If I’m stalking a breakout setup in a stock like Nvidia (NVDA), and I see improving breadth — more names breaking out, more sectors catching bids — I’m more aggressive with sizing.
But if breadth is deteriorating while indexes grind higher, I’m cautious. I might take the trade, but it’ll be smaller, tighter and probably short-lived.
This is especially important when you see certain sectors — like Technology (XLK) or Communication Services (XLC) — doing all the heavy lifting. That’s not broad strength. That’s narrow leadership. And narrow leadership doesn’t last forever.
Sometimes I’ll skip a setup entirely based on breadth. That’s not fear — it’s context. I’d rather sit out than get chopped up on something that looks good on the surface but has no support underneath.
Market breadth won’t tell you what to buy. But it will help you decide when to press and when to protect. It’s one of the first things I check every morning — and one of the reasons I avoid a lot of the traps other traders walk into.
Ignore it, and you’re trading blind. Use it, and you’ll have an edge most don’t.
Graham Lindman
Graham Lindman Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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We develop tools and strategies to the best of our ability but no one can guarantee the future. There is always a risk of loss when trading. Past Performance is not indicative of future results. What you will see today are some of the best examples from the public trades that use this underlying method. From 7/2025 through 10/2025 the win rate was 84.4% with a 41% average winner and 23% average net return of winners and losers over a 1 day average hold time.
