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.

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