“Trend is your friend” is an old saying but how do you know if the stock/index is trending, surely higher tops -higher lows – lower tops-lower lows and trendlines help – but what if there is an indicator which gives you the precise number of the technical strength?
ADX- Average directional index.
Developed by J. Welles Wilder, Jr. also known for creating one of the most popular indicator RSI.
ADX is a non-directional indicator which means it will not tell you in which direction the security will move but will calculate the strength of the indicator.
ADX calculation is based on a 14-period moving average (which can be customized)
Let’s get straight to understanding the indicator, The value represents if the stock is trending or not.
ADX Value Trend
0-25 Trend is weak
25-50 Strong Trend
50-75 Very strong