Average Directional Index (ADX)
The average directional index (ADX) is used in technical analysis of a stock to determine the strength of its trend as it progresses upward or downward.
An indicator that uses a scale of zero to 100, the average directional index smoothes the difference between the negative directional indicator (-DI) and positive directional indicator (+DI).
Average Directional Index Technical Analysis
In average directional index technical analysis, if the chart displays a positive directional indicator value of 40 or above, it is indicative of a strong trend. When the ADX is less than 20, the trend is considered weak and presents a clear signal to the investor that they should not use a trend following system.
The numerical value represented by the average directional index only shows the strength of the trend, not the upwards or downwards movement of the trend.
If you are interested in applying average directional index technical analysis to your stock picks, you may want to consider signing up for a risk-free 14 day free trial of SmarTrend – and take the guesswork out of your trading.
Next: Technical Analysis: Oscillator/Indicator - Aroon
Table of Content
1. Overview
2. Trends
3. Support & Resistance
4. Volume
5. Stock Charts
5a. Line Charts
5b. Bar Charts
5c. Candlestick Chart
5d. Point and Figures Charts
6. Chart Patterns
6a. Head & Shoulders
6b. Cup & Handle
6c. Double Tops & Bottoms
6d. Triangles
6e. Flag and Pennant
6f. Wedge
6g. Gaps
6h. Triple Tops & Bottoms
6i. Rounding Bottoms
7. Moving Averages
8. Oscillator/Indicator
8a. Average Directional Index
8b. Aroon
8c. Aroon Oscillator
8d. Moving Average Convergence
8e. Relative Strength Index
8f. On Balance Volume
8g. Stochastic Oscillator
