Average Directional Index (ADX)

Understanding the Average Directional Index (ADX)

The Average Directional Index (ADX) is a valuable tool used to determine the comprehensive strength of a trend.

It is based on the concept that trading in the direction of a strong trend increases the chances of profitability while reducing risks significantly.

Originally developed by Welles Wilder for daily commodity charts, the ADX indicator is now widely used by technical traders and financial experts across various markets to assess trend strength.

Assessing Trend Strength Beyond Market Direction

The Average Directional Movement Index (ADX) is a non-directional indicator that measures trend strength irrespective of whether prices rise or fall.

It is part of the Directional Movement System, which includes the DMI+ and DMI- indicators and the ADX.

The goal is to evaluate the strength of price movement in both positive and negative directions.