Average Directional Index (ADX)
The Average Directional Index (ADX) is a technical indicator used to measure the strength of a trend. It is calculated using a combination of three other indicators: the +DI, -DI, and the Average True Range (ATR). The ADX is used to determine whether a market is trending or ranging, and it can also be used to measure the strength of a trend. The higher the ADX, the stronger the trend.
History of the Average Directional Index
The Average Directional Index was developed by J. Welles Wilder Jr. in 1978. Wilder was a commodities trader and technical analyst who developed several popular technical indicators, including the Relative Strength Index (RSI) and the Parabolic SAR. The ADX was first introduced in his book, New Concepts in Technical Trading Systems. Since then, the ADX has become a widely used technical indicator among traders and investors.
How to Use the Average Directional Index
The ADX is used to determine whether a market is trending or ranging. If the ADX is below 25, the market is considered to be ranging. If the ADX is above 25, the market is considered to be trending. The higher the ADX, the stronger the trend. Traders can also use the ADX to measure the strength of a trend. The higher the ADX, the stronger the trend.
Table of Comparisons
| Indicator | Range | Trend |
|---|---|---|
| ADX | 0-25 | Ranging |
| ADX | 25-50 | Strong Trend |
| ADX | 50+ | Very Strong Trend |
Summary
The Average Directional Index (ADX) is a technical indicator used to measure the strength of a trend. It is calculated using a combination of three other indicators: the +DI, -DI, and the Average True Range (ATR). The ADX is used to determine whether a market is trending or ranging, and it can also be used to measure the strength of a trend. The higher the ADX, the stronger the trend. For more information about the ADX, traders can visit Investopedia, TradingView, and other financial websites.
See Also
- Relative Strength Index (RSI)
- Parabolic SAR
- Moving Average Convergence Divergence (MACD)
- Bollinger Bands
- Stochastic Oscillator
- On Balance Volume (OBV)
- Commodity Channel Index (CCI)
- Williams %R
- Chaikin Money Flow (CMF)
- Price Volume Trend (PVT)
