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What Is the Average Directional Index (ADX)?
The trend can be either up or down, and this is shown by two accompanying indicators, the negative directional indicator (-DI) and the positive directional indicator (+DI). Therefore, the ADX commonly includes three separate lines. These are used to help assess whether a trade should be taken long or short, or if a trade should be taken at all.
- Designed by Welles Wilder for commodity daily charts, the ADX is now used in several markets by technical traders to judge the strength of a trend.
- The ADX makes use of a positive (+DI) and negative (-DI) directional indicator in addition to the trendline.
- The trend has strength when ADX is above 25; the trend is weak or the price is trendless when ADX is below 20, according to Wilder.
- Non-trending doesn't mean the price isn't moving. It may not be, but the price could also be making a trend change or is too volatile for a clear direction to be present.
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