Average Directional Index (ADX) Type: Momentum, Trend (using +DI & -DI), Volatility
The ADX was developed by John Welles Wilder, Jr.. It is a lagging indicator; that is, a
trend must have established itself before the ADX will generate a signal that a trend is under way.
ADX will range between 0 and 100 which makes it an oscillator. It is a smoothed average of the Directional
Movement Index (DMI / DX).
Generally, ADX readings below 20 indicate trend weakness, and readings above 40 indicate trend strength. A
strong trend is indicated by readings above 50. ADX values of 75-100 signal an extremely strong trend.
Interpretation: If ADX increases, it means that volatility is increasing and indicating the beginning of a
new trend. If ADX decreases, it means that volatility is decreasing, and the current trend is slowing down
and may even reverse. When +DI is above -DI, then there is more upward pressure than downward pressure in
the market.
Note: The ADX calculation relies on the DX becoming stable before producing meaningful results. For an
interval of 5, at least 9 candles are required. The first 5 candles are used to stabilize the DX, which
then generates the initial ADX value. The subsequent 4 candles produce additional ADX values, allowing it
to stabilize with 5 values for an interval of 5.
Average Directional Index (ADX) Type: Momentum, Trend (using +DI & -DI), Volatility
The ADX was developed by John Welles Wilder, Jr.. It is a lagging indicator; that is, a trend must have established itself before the ADX will generate a signal that a trend is under way.
ADX will range between 0 and 100 which makes it an oscillator. It is a smoothed average of the Directional Movement Index (DMI / DX).
Generally, ADX readings below 20 indicate trend weakness, and readings above 40 indicate trend strength. A strong trend is indicated by readings above 50. ADX values of 75-100 signal an extremely strong trend.
Interpretation: If ADX increases, it means that volatility is increasing and indicating the beginning of a new trend. If ADX decreases, it means that volatility is decreasing, and the current trend is slowing down and may even reverse. When +DI is above -DI, then there is more upward pressure than downward pressure in the market.
Note: The ADX calculation relies on the DX becoming stable before producing meaningful results. For an interval of 5, at least 9 candles are required. The first 5 candles are used to stabilize the DX, which then generates the initial ADX value. The subsequent 4 candles produce additional ADX values, allowing it to stabilize with 5 values for an interval of 5.
See