Average Directional Index (Adx)
| The Average Directional Index (ADX) is an indicator used to measure the strength of a market trend. The ADX is represented by numeric figures between 1 and 100. A market trend is the general direction of a market or of the price of an asset, and trends can be bullish (upward), bearish (downward), or sideways. The ADX is used to quantify the strength of a trend, and it is calculated using a moving average of price range expansion over a given period of time. The ADX is not used to determine the direction of the trend, but rather to measure its strength. The ADX is a popular indicator among traders and investors, as it can be used to identify potential trend reversals, as well as to confirm the existence of a trend. The ADX is calculated using a formula that includes three components: the +DI, the -DI, and the DX. The +DI is the difference between the high of today's price range and the high of the previous price range. The -DI is the difference between the low of today's price range and the low of the previous price range. The DX is the difference between the +DI and the -DI. The ADX is then calculated as the moving average of the DX over a given period of time. The ADX is a versatile indicator that can be used in a number of ways. Some traders use the ADX to confirm the existence of a trend, while others use it to identify potential trend reversals. The ADX can also be used to set trailing stop-loss orders. |
Share this glosssary
