Average Directional Index (ADX)
Average Directional Index (ADX) is a technical indicator developed by Welles Wilder. The ADX measures trend strength, but not direction; the higher the ADX reading, the stronger the trend.The formula, which can be found in Wilder's 1978 book New Concepts in Technical Trading Systems, is quite lengthy but essentially compares the average amount of upward price movement (measured from high to high) and the downward price movement (measured from low to low) over a given time period.
Below, an example of the 14-period Average Directional Index (ADX) against the S&P 500 Trust ETF, SPY
Learn more about the Average Directional Index at Wikipedia here.
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