ADX and Directional Indicators for Assessing Trend Strength

Summary

The Average Directional Index is presented as a way to assess the strength or momentum of an existing trend, rather than its direction by itself. The explanation pairs ADX with the positive and negative directional indicators: +DI reflects upward directional movement, while -DI reflects downward movement. Comparing those lines can help identify which side is prevailing, while ADX conveys trend strength.

The document describes a modified display intended to make interpretation easier through a significant reference level and color changes in the ADX value and histogram. It gives no formula, parameter settings, threshold values, chart examples, or tests showing that the revised presentation improves decisions. It also does not specify trading rules or explain how to handle weak, ranging, or changing market conditions. The material is therefore an introductory description of an indicator presentation, not a validated strategy.

Key ideas

• ADX is described as measuring trend strength rather than trend direction.
• The positive directional indicator tracks upward movement, while the negative indicator tracks downward movement.
• The relative positions of +DI and -DI can indicate the prevailing direction.
• A reference level and color-coded display are intended to simplify visual interpretation.
• The document supplies no tested trading rules or performance evidence.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.