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# A Quick Guide to Using the Average Directional Movement Index for Trend Analysis and Momentum Trading

## Understanding the Basics of ADX

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One of the best methods to improve your chances of success is to trade with the trend. The Average Directional Movement Index (ADX) is a well-liked indicator that is useful as a trading tool since it enables traders to assess the strength of a trend. This article will explain the ADX indicator and show you how to use it efficiently when trading.

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## Introduction

The average directional movement index was created in the 1970s by J. Welles Wilder. A smoothed moving average is produced by combining two indicators and is shown on your charts. The positive directional indicator (+DI) and the negative directional indicator are the two indicators (-DI). This indicator’s default period is 14, however it may be changed to accommodate other time frames and markets, such as forex, stocks, and cryptocurrencies.

You will notice a single line that spans a value of 0 to 100 along with the +DI and -DI lines after plotting the ADX on your chart. You can easily ascertain whether the price is in a strong trend or range by using the ADX’s fundamental readings. Remember that the ADX is not intended to signal the start of a new trend; rather, it is used to demonstrate the strength of an existing trend.

The +DI and -DI indicators are used to calculate the ADX measurement, with 14 periods being the default. These calculations are based on the price history of the prior high, low, and close for the same amount of periods. It’s crucial to remember that the ADX is used to measure the strength of an existing trend rather than to predict the onset of a new one. Generally speaking, a value below 25 is thought to represent a sideways or range market, while a higher reading beyond 25 denotes a more pronounced trend.

• 0 to 25: Indicating a ranging or non-trending market
• 25 to 50: Indicating a market that is trending
• 50 to 75: Indicating a strong trend
• 75 to 100: Indicating a very strong trending market.