Average Directional Movement [ADX]

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The Average Directional Movement function is smoothed version of the Direcitonal Movement Index, which determines the strength of the current price trend by comparing the positive movement to the negative movement. Parameters ------------------ Close         The closing price of the security for each given day. High          The high price of the security for each given day. Low           The low price of the security for each given day. DX Period  The number of bars of data to include in the Directional Movement Index, including the current value.                   For example, a period of 3 uses the changes for the current bar and the two previous bars. Smoothing Period  The number of bars to smooth the Directional Movement Index. Note that while this function is intended for use with these specific values, any values can be used for these parameters, including other price values and averaged prices. Function Value ------------------------ The Average Directional Movement is a smoothed version of the Directional Movement Index. Its value is similar to an exponential moving average of the Directional Movement Index, except that the period is interpreted differently. Usage ----------- Like the Directional Movement Index, Average Directional Movement determines the strength of current price trends by comparing negative and positive price movements. The closer the value is to 100, the more that the price is moving primarily in one direction. The closer the value is to 0, the more that the price is remaining around a constant trading price. Common interpretations view values greater than 25 or 30 as indicating that the market is trending. Values less than 20 or 15 often indicate that a breakout will occur soon. Source ------------ This indicator was developed by J. Welles Wilder and presented in his book "New Concepts in Technical Trading Systems".