Average Directional Index (ADX)
An indicator used in technical analysis to determine the strength of a prevailing trend. The ADX is measured on a scale between zero and 100. Readings below 20 are used to indicate a weak trend, while readings over 40 indicate a strong trend. ADX is not used to determine the direction of a particular trend, but only to gauge its strength.
Investopedia Says:
Traders use a move above 20 to suggest the start of a new trend (either up or down) and a move below 40 to suggest that the current trend may be coming to an end. The ADX is a derivation of two separate indicators known as direction momentum indicators (+DI and -DI). Unlike the ADX, these direction momentum indicators can be used to gauge trend direction and are commonly plotted alongside the ADX. Related Terms:
Directional Movement Index - DMI
Downtrend
Indicator
Negative Directional Indicator - -DI
Positive Directional Indicator - +DI
Reversal
Sidways Trend
Trend
Uptrend |