Showing posts with label adx-indicator-pdf. Show all posts
Showing posts with label adx-indicator-pdf. Show all posts

AVERAGE DIRECTIONAL INDEX

AVERAGE DIRECTIONAL INDEX

 AVERAGE DIRECTIONAL INDEX


The Average Directional Index (ADX) was developed in 1978 by J. Welles Wilder as an indicator of trend strength in a series of prices of a financial instrument. ADX has become a widely used indicator for technical analysts, and is provided as a standard in collections of indicators offered by various trading platforms.


Calculation of ADX  

 The ADX is a combination of two other indicators developed by Wilder, the positive directional indicator (abbreviated +DI) and negative directional indicator (-DI). The ADX combines them and smooths the result with an exponential moving average.


 AVERAGE DIRECTIONAL INDEX

 

Interpretation



The ADX does not indicate trend direction, only trend strength. It is a lagging indicator; that is, a trend must have established itself before the ADX will generate a signal that a trend is underway. ADX will range between 0 and 100. Generally, ADX readings below 20 indicate trend weakness, and readings above 40 indicate trend strength. An extremely strong trend is indicated by readings above 50.


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