Indicator - ADX

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Calculation ADX

We first calculate +DM and -DM (the directional movement), which represent directional movement. We then apply a wilder moving average on +DM and -DM to calculate +DI and -DI. Then we calculate DX. Dx= 100*((+DI)-(-DI))/((+DI)+(-DI)).
Finally to obtain ADX we apply again a Wilder moving average on DX.
A second smoothing lets us calculate ADXR.

Interpretation ADX

DI+ represents buying pressure and Di- selling pressure.
When Di+>di- it's a bullish signal and when Di-<di+ it's a bearish signal.
ADX and ADXR are momentum indicators.
A trending market occurs when ADX or ADXR rises above the 17 or 23 level.
It is also worth watching when ADX falls below ADXR as this can indicate that the movement is close to completion.

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