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Trading and Investment Terms

ADX

ADX stands for Average Directional Movement Index and can be used to help measure the overall strength of a trend.

The ADX is primarily used as an indicator of momentum, or trend strength, but the total ADX system is also used as a directional indicator.

Calculation 

The Average Directional Index (ADX) is in turn derived from the smoothed averages of the difference between +DI and -DI

 It measures the strength of the trend (regardless of direction) over time.

  • Designed by Welles Wilder for commodity daily charts, but can be used in other markets or other timeframes.
  • The price is moving up when +DI is above -DI and the price is moving down when -DI is above +DI.

 

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