What is the Average Directional Index (ADX)?

What is the Average Directional Index (ADX): A chart indicator used in the technical analysis of financial markets. Its primary purpose is to measure the strength of price trends.

Category: Technical analysis indicator

How is the Average Directional Index (ADX) Used: The Average Directional Index (ADX) measures the trend strength of a market. The higher the ADX reading, the stronger the trend. Likewise, the lower the ADX reading, the weaker the trend. ADX is non-directional – that is, whether the underlying market is going up or down is not measured by ADX. Only the strength of each up or down move is measured by this indicator. The mathematical calculation of ADX is a moving average of a price range over a given past period of time. This time period can be set to different levels according to the user’s preference.

What Does the Average Directional Index (ADX) Consist of: The Average Directional Index (ADX) is a single line that fluctuates between boundaries of 0-100. The ADX can be used alone, but is often combined with two complementary indicators: Directional Movement Index+ (+DI) and Directional Movement Index- (-DI). ADX is usually placed either above or below the price chart.

What Does the Average Directional Index (ADX) Look Like:

Chart of the Average Directional Index (ADX)
Chart of the Average Directional Index (ADX) – Source: TheTechnicals.com and TradingView

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