Combining ADX and Relative ATR to Assess Trend Conditions

Summary

This indicator combines the distance between ADX and ADXR with the relative change in ATR to describe trend development and volatility together. The author argues that ADX alone can miss changes in volatility, while ATR alone is expressed in absolute price units and is difficult to compare across instruments. The proposed histogram weights the relative ATR component and ADX–ADXR strength, and offsets ADX by a configurable baseline so the series can be viewed around a common reference level.

The indicator marks elevated combined readings as a strong, volatile trend and low readings as quiet conditions that may reflect volatility compression. It also draws a marker when ADX crosses a high threshold, which the author associates with possible trend collapse. Example defaults and formulas are supplied, but the text provides no backtest, trade rules, or statistical validation for these interpretations. The signals describe conditions rather than direction, and thresholds and component weights may need instrument-specific evaluation.

Key ideas

• The indicator combines ADX–ADXR separation with relative ATR variation.
• Relative ATR helps compare volatility across instruments with different price scales.
• A configurable ADX baseline shifts the trend readings around a common reference.
• High combined values represent strong trends with elevated volatility, while low values indicate quiet conditions.
• The proposed collapse marker and threshold interpretations are not validated with performance evidence in the document.

Tags

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