| Developed by J. Welles Wilder, the Average Directional Index (ADX) is used to measure the strength of a trend in financial markets. The ADX is derived from two other indicators, the Positive Directional Indicator (+DI) and the Negative Directional Indicator (-DI). The +DI measures upward price movement, while the -DI measures downward price movement. The ADX is calculated by dividing the difference between the +DI and -DI by the sum of the two values. The resulting value ranges from 0 to 100, with higher values indicating a stronger trend. When the ADX is below 20, it suggests that the trend is weak, while values above 40 indicate a strong trend. Values between 20 and 40 suggest that the trend may develop and gain strength. |
