Online Trading Concepts

Interpreting the ADX

ADX Indicator

  1. ADX Average Directional Index
  2. Interpreting the ADX

It is important to re-emphasize that the direction of price doesn't affect the ADX; it is the strength of the stock, futures, or currency's trend that matters.

Below, we see the E-mini Russell 2000 Futures contract, but here the e-mini future is in a downtrend, a strong downtrend. Note that the ADX is rising even though the price of the e-mini future is falling.

ADX Average Directional Index

Interpreting the ADX

In his book, New Concepts in Technical Trading Concepts, Welles Wilder, Jr., the creator of the ADX also created the DMI+ and DMI- indicators to generate potential buy and sell signals specifically for the ADX technical analysis indicator. In fact the ADX is derived from the DMI+ and DMI- calculations (see: DMI).

The most recent information on the ADX indicator is chronicled in the book ADXcellence by Dr. Charles B. Schaap.

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