Average Directional Index (ADX)

Parameters: period = 14 (7–50)

Overview

The Average Directional Movement Index (ADX) was developed in 1978 by J. Welles Wilder Jr. as an indicator to measure trend strength. The ADX, along with the Plus Directional Indicator (+DI) and Minus Directional Indicator (-DI), forms the backbone of Wilder's Directional Movement System.

The ADX is a powerful tool for assessing the strength of a trend, but it does not provide information about the direction of the trend. This non-directional nature makes it valuable for determining whether to use trend-following or range-trading strategies. The ADX focuses solely on trend strength over time, registering the same whether price moves up or down.

Interpretation & Trading Signals

ADX Trend Strength Readings:

  • 0-20: Weak or no trend - ranging market conditions
  • 20-25: Gray zone - requires further analysis
  • 25-50: Strong trend - trend-following strategies recommended
  • 50-75: Very strong trend - powerful momentum present
  • 75-100: Extremely strong trend - rare and often unsustainable

Directional Trading Signals:

  • Buy Signal: +DI crosses above -DI while ADX is rising above 25
  • Sell Signal: -DI crosses above +DI while ADX is rising above 25
  • Strong Uptrend: +DI above -DI with ADX rising confirms bullish momentum
  • Exit Signal: ADX lines falling suddenly indicates weakening trend

Key Trading Considerations:

  • Lagging Nature: Trend must establish before ADX generates signal
  • Best Practices: Combine with moving averages, RSI, or support/resistance levels
  • Universal Application: Works on all markets and timeframes
  • Default Setting: Wilder recommended 14-period, but adjust based on market

Example Usage

Code examples will be available once the Rust implementation is complete.

Performance Analysis

Related Indicators

Accumulation/Distribution

Technical analysis indicator

Average Directional Movement Index Rating

Technical analysis indicator

Alligator

Technical analysis indicator

Aroon

Technical analysis indicator

Aroon Oscillator

Technical analysis indicator

Directional Indicator (+DI/-DI)

Technical analysis indicator