Welles Wilder’s Directional Movement Index

Welles Wilder’s Directional Movement Index

Welles Wilder’s Directional Movement Index, or ADX for short, measures the strength of the trend wi thout regard to trend direction. The other two indicators that come with it: The Plus Directional Indicator (+DI) and the Minus Directional Indicator (-DI), define trend direction. Used together, chartists can determine both the direction and strength of the trend.

Welles Wilder’s Directional Movement Index

A buy signal is generated when the +DI crosses up over the -DI, when the DX/ADX signals a strong trend. A high DX signals a strong trend and a low DX signals a weak trend. DX is usually smoothed with a moving average (ADX)

A sell signal is generated when the -DI crosses up over the +DI.

Note: there is a lot of smoothing involved and it can take around 150 periods of data to get true ADX values.