Wilder's DMI (ADX)

The Average Directional Index (ADX) is a technical indicator developed by J. Welles Wilder Jr. that measures the strength of a trend. It is based on the premise that the stronger the trend, the more likely it will continue. The ADX is calculated by averaging the absolute values of the positive and negative directional indicators (DIs). The DIs are calculated by measuring the difference between the 14-period moving average of the price highs and lows and the 14-period moving average of the difference between the highs and lows.

The ADX is a momentum indicator, which means that it measures the speed and direction of price movements. It is not a trend-following indicator, which means that it does not predict where the price will go. Instead, it indicates the strength of the trend and whether it is likely to continue.

The ADX is typically used in conjunction with other indicators to confirm trends and identify potential reversals. It can also be used to identify trading opportunities.

The ADX is a versatile indicator that can be used in a variety of trading strategies. It is a valuable tool for traders of all experience levels.

Here are some additional details about the ADX:

• The ADX is a range-bound indicator, which means that it typically oscillates between 0 and 100.
• A reading of 0 indicates that there is no trend.
• A reading of 25 indicates a weak trend.
• A reading of 50 indicates a strong trend.
• A reading of 75 indicates a very strong trend.
• The ADX can be used to identify trend reversals. A bullish reversal occurs when the ADX falls below 25 and then rises above 25. A bearish reversal occurs when the ADX rises above 75 and then falls below 75.
• The ADX can also be used to identify trading opportunities. A trading opportunity occurs when the ADX is trending up and the price is making a new high.

The ADX is a valuable tool for technical analysis. It can be used to confirm trends, identify potential reversals, and identify trading opportunities.