ADX Directional Movement and Trend Strength Calculation

Summary

This note introduces the Average Directional Index (ADX), an indicator calculated from high, low, and close prices over a chosen lookback length. It outlines the intermediate calculations: true range, positive and negative directional movement, and the positive and negative directional indicators. These components compare upward and downward price movement after smoothing them with an exponential moving average.

ADX then expresses the absolute difference between the directional indicators relative to their sum, smoothed over the same length. The note supplies pseudocode but no examples, threshold guidance, tests, or evidence about predictive performance. It also refers to a separate document for interpretation, which is not included here. The formula as rendered appears to have missing operators in places, so implementation details should be checked against a reliable ADX definition before use.

Key ideas

• ADX is derived from high, low, and close prices over a selected lookback length.
• The calculation first smooths true range and positive and negative directional movement.
• Positive and negative directional indicators normalize directional movement by true range.
• ADX smooths the normalized difference between positive and negative directional indicators.
• The supplied material does not explain interpretation or establish trading performance.

Tags

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