Average Directional Index (ADX) was developed by J. Welles Wilder Jr. and as its name implies attempts to measure the strength of the direction the security is moving in.
ADX is measured in a scale from 0-100 with readings above 25 indicating that you are in a trend whilst readings below 25 indicate that you are not in a trend. As the scale is measured from 0-100 it doesn't matter if the trend is up or down, the scale and reading are still from 0-100 e.g. if you were in a strong down trend the reading might be 45. You might get the exact same reading if you were in a strong up trend. The reason I mention this is that many of my students get confused when first introduced to ADX and see the indicator rising as the trend goes down (see chart below).
Wilder himself admitted that ''Directional movement is the most fascinating concept I have ever studied'' 'New Concepts In Technical Trading Systems'. Readings of over 60 are fairly rare in my observations and once they are at the extremes can actually mean thedirection is getting ready for a change.
ADX is measured in a scale from 0-100 with readings above 25 indicating that you are in a trend whilst readings below 25 indicate that you are not in a trend. As the scale is measured from 0-100 it doesn't matter if the trend is up or down, the scale and reading are still from 0-100 e.g. if you were in a strong down trend the reading might be 45. You might get the exact same reading if you were in a strong up trend. The reason I mention this is that many of my students get confused when first introduced to ADX and see the indicator rising as the trend goes down (see chart below).
Wilder himself admitted that ''Directional movement is the most fascinating concept I have ever studied'' 'New Concepts In Technical Trading Systems'. Readings of over 60 are fairly rare in my observations and once they are at the extremes can actually mean thedirection is getting ready for a change.
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