The Average Directional Index (ADX) is a technical analysis indicator used to quantify the strength of a trend in a security's price movement. Typically ranging from 0 to 100, the ADX is derived from the smoothed averages of the directional movement indicators (DMI). An ADX value below 20 generally indicates a weak trend or a consolidation phase, while a value above 25 suggests a stronger trend. Traders often use ADX in conjunction with the directional indicators to identify both the strength and potential direction of the trend. By doing so, they can make more informed decisions regarding entry and exit points within their trading strategies.
Technical Analysis