Average Directional & Directional Movement IndexTechnical Analysis
The ADX is properly called the Average Directional Index. This is used to measure the strength of a current trend. It has no directional bias. It simply measures the trending strength of price. When combined with the Directional Movement Index, the indicator becomes “DMI and ADX”.
The Directional Movement Index splits into a positive directional index and a negative directional index. One is known as +DI, and the other is known as –DI. The +DI measures the upwards trend strength, while –DI measures downwards trend strength. A trend strength of over 25 is strong, while trend strength under 25 is weak.
Filtering by trend helps ensure correct usage. A buy signal occurs if +DI crosses over –DI, and +DI remains above in an uptrend. A sell signal occurs if –DI crosses over +DI, and –DI remains above in a downtrend. Signals strengthen if ADX is over 25 and weakens if below.
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