Definition
ADX measures how strong a trend is on a scale of 0-100, without indicating direction. Readings above 25 suggest a strong trend; below 20 indicate a weak or ranging market. It's derived from the +DI and -DI directional indicators.
Formula
ADX = 100 × Smoothed(|+DI - -DI| / |+DI + -DI|)
Example
An ADX of 40 indicates a strong trend (either up or down). An ADX of 15 suggests the market is ranging and breakout strategies may fail.
FAQ
What is Average Directional Index (ADX)?
An indicator measuring trend strength regardless of direction.
How do you calculate Average Directional Index (ADX)?
A common formula for Average Directional Index (ADX) is: ADX = 100 × Smoothed(|+DI - -DI| / |+DI + -DI|)
Why is Average Directional Index (ADX) important?
Average Directional Index (ADX) helps investors evaluate technical analysis and make more informed decisions.