Average Directional Index Rating (ADXR)
period = 14 (7–50) Overview
The Average Directional Movement Index Rating (ADXR) is a smoothed extension of the Average Directional Movement Index that measures trend strength over a specified period. It quantifies the change of momentum in the ADX by averaging the current ADX value with an ADX value from N periods ago, typically using the same period as the ADX calculation.
This additional smoothing makes the ADXR slightly less responsive than ADX, but provides a more stable view of trend strength that helps avoid false signals during sideways markets. The ADXR is particularly valuable for confirming trends identified by ADX and assessing potential reversals in volatile market conditions.
Interpretation & Trading Signals
ADX/ADXR Crossover Signals:
- Buy Signal: ADX rises above ADXR while both are above 25 - trend gaining steam
- Sell Signal: ADX falls below ADXR - trend momentum weakening
- Exit Signal: ADXR rises above ADX - potential trend exhaustion
- Strengthening Trend: ADXR crosses above ADX - reinforces trend continuation
Trend Strength Interpretation:
- Below 25: Avoid trend-following strategies - market likely ranging
- Above 25: Sufficient momentum for trend trading
- Rising ADXR: Dominant trend likely to continue
- Declining ADXR: Not advised to use trend following systems
Advanced Trading Applications:
- Divergence Analysis: Price new highs with falling ADXR indicates weakening trend
- Conservative Signals: Align both ADX and ADXR for more accurate entries
- Volatile Markets: ADXR better displays trends due to smoothing effect
- Direction Neutral: Does not indicate trend direction, only strength
Example Usage
Code examples will be available once the Rust implementation is complete.