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Average Directional Movement Index

Average Directional Movement Index, often referred to as ADX, is a tool used in technical analysis to measure the strength of either a bullish (upward) or bearish (downward) trend. Created by J. Welles Wilder Jr, the ADX ranges from 0 to 100 and is non-directional, meaning it examines the strength of a trend but does not identify its direction.

A low ADX value (0-25) typically indicates a weak or absent trend, while a high value (25-100) indicates a strong trend. It is important to note however that a high ADX value does not necessarily mean a positive or profitable move. A strong upward trend can be equally as volatile as a strong downward trend.

The ADX is based on a comparison of two other indicators, also created by Wilder: the positive directional movement (DMI+) and negative directional movement (DMI-). If the DMI+ is greater than the DMI-, this indicates a positive or bullish market trend. But if the DMI- is greater than the DMI+, this indicates a negative or bearish market trend.

However, remember that like all indicators, the ADX should never be used alone but should be combined with other indicators and tools for a more complete and accurate analysis

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