The average directional index (ADX) is used to determine when the price is trending strongly. In many cases, it is the ultimate trend indicator. After all, the trend ...LinkedInwithBackgroundTechnicalAnalysisGuidetoTechnicalAnalysisTechnicalAnalysisBasicEducationAdvancedTechnicalAnalysisConceptsTechnicalAnalysisTechnicalAnalysisBasicEducationTableofContentsExpandIntroductiontoADXQuantifyingTrendStrengthTrendMomentumStrategicUseofADXADXasaRangeFinderTheBottomLineTradinginthedirectionofastrongtrendreducesriskandincreasesprofitpotential.Theaveragedirectionalindex(ADX)isusedtodeterminewhenthepriceistrendingstrongly.Inmanycases,itistheultimatetrendindicator.Afterall,thetrendmaybeyourfriend,butitsurehelpstoknowwhoyourfriendsare.Inthisarticle,we'llexaminethevalueofADXasatrendstrengthindicator.IntroductiontoADXADXisusedtoquantifytrendstrength.ADXcalculationsarebasedonamovingaverageofpricerangeexpansionoveragivenperiodoftime.Thedefaultsettingis14bars,althoughothertimeperiodscanbeused.ADXcanbeusedonanytradingvehiclesuchasstocks,mutualfunds,exchange-tradedfundsandfutures.ADXisplottedasasinglelinewithvaluesrangingfromalowofzerotoahighof100.ADXisnon-directional;itregisterstrendstrengthwhetherpriceistrendingupordown.Theindicatorisusuallyplottedinthesamewindowasthetwodirectionalmovementindicator(DMI)lines,fromwhichADXisderived(shownbelow).Fortheremainderofthisarticle,ADXwillbeshownseparatelyonthechartsforeducationalpurposes.ADXisnon-directionalandquantifiestrendstrengthbyrisinginbothuptrendsanddowntrends.ImagebySabrinaJiang©Investopedia 2020Whenthe+DMIisabovethe-DMI,pricesaremovingup,andADXmeasuresthestrengthoftheuptrend.Whenthe-DMIisabovethe+DMI,pricesaremovingdown,andADXmeasuresthestrengthofthedowntrend.Thechartaboveisanexampleofanuptrendreversingtoadowntrend.NoticehowADXroseduringtheuptrend,when+DMIwasabove-DMI.Whenpricereversed,the-DMIcrossedabovethe+DMI,andADXroseagaintomeasurethestrengthofthedowntrend.QuantifyingTrendStrengthADXvalueshelptraders identifythestrongestandmo