What is the ADX Indicator?

The ADX Indicator is a Technical Indicator that uses values Irom 2 other indicators, the Negative
Directional Indicator and the Positive Directional Indicator, and another value, the ADX.
What is ADX?
ADX is an acronym Ior Average Directional Index. It was developed by J. Welles Wilder to determine the
momentum behind a certain trend, whether it be negative or positive. The ADX can range Irom values
between 0 and 100.
ADX InIerence
20 Weak trend
~40 Strong Trend
~60 Extremely rare

What does it the ADX really refer to?
These numbers only reIer to the strength oI the trend, not the trend itselI. For example a negative trend have
an ADX 50 and going strong, 10 and going weak, just as a positive trend can be strong or weak.
What do changes in ADX indicate?
ADX`s that are extremely low can oIten mean non-trending, or 'trading range. Fluctuations in ADX mean
increased or decreased strength oI trends, or a shiIt between trending and trading.
Changes InIerence
ADX increase trend is emerging or gaining strength
ADX decrease trend is losing strength, trading range develops

Why use the ADX?
Determining the ADX oI a market is a prerequisite Ior selecting an indicator. Some indicators are more
accurate when applied to markets that trending, and some are more accurate when predicting the outcome oI
markets that are trading.
How do traders interpret all this information?
The ADX indicator visualizes and compares 3 main components: the Positive Directional Indicator, the
Negative Directional Indicator, and Average Directional Index.
Component Symbol Measures Color
Positive Directional Indicator DI Force oI up moves Green
Negative Directional Indicator -DI Force oI down moves Red
Average Directional Index ADX Strength oI trend Black


How does the ADX Indicator dictate trader strategies?
When the red (DI) and green (-DI) lines cross, buy or sell signals will emerge.
Buy DI moves above DI
Sell -DI moves above the DI.


What do buy and sell signals mean?
These do not necessarily mean that the trader will buy or sell, rather they are theoretical. The closer the
ADX is to trading range, the more inaccurate these buy and sell signals are. Traders typically use many
indicators in conjunction with one another, in order to ensure they are making the right decision. Because
the ADX indicator uses short-term trends and prediction is, again, never deterministic, buying and selling
based solely on the ADX Indicator can lead to whipsaws.
What are whipsaws?
(n.) A whipsaw occurs when a buy or sell signal is reversed in a short time.
(v.) To lose money in a volatile market by buying beIore rapid drops and selling beIore rapid rises.