ADX
Average Directional Index — measures trend strength from 0 to 100 without indicating direction.
Definition
ADX, another Wilder creation, is a non-directional measure of trend strength. ADX below 20 indicates a weak or non-existent trend (range-bound market); 20-40 a developing trend; 40+ a strong trend; 50+ very strong. ADX is paired with +DI and -DI lines to determine direction. The classic system: enter when +DI crosses above -DI while ADX > 25 (long) and the mirror image (short). ADX filters out RSI/MACD whipsaw signals in choppy markets.
Formula
+DM = max(High_t - High_{t-1}, 0) if larger than -DM else 0
-DM = max(Low_{t-1} - Low_t, 0) if larger than +DM else 0
+DI = 100 * smoothed(+DM) / ATR
-DI = 100 * smoothed(-DM) / ATR
DX = 100 * |+DI - -DI| / (+DI + -DI)
ADX = Wilder's smoothed average of DX, typically 14 periodsWorked example
EUR/USD shows ADX(14) = 32, +DI = 28, -DI = 15. Trend is strong (ADX > 25) and bullish (+DI > -DI). A pullback into a moving average is a higher-probability long entry than a fresh breakout.
How ARIA Analyst uses it
ARIA only allows trend-following setups (MACD crossovers, EMA breakouts) when ADX > 20 in the Technical Agent, dramatically reducing whipsaw entries during ranges.
Related terms
MACD
Moving Average Convergence Divergence — a trend-following momentum indicator built on two EMAs.
Exponential Moving Average (EMA)
A moving average that weights recent prices more heavily — faster than the SMA.
Relative Strength Index (RSI)
A 0-100 momentum oscillator measuring the speed and magnitude of recent price changes.
Average True Range (ATR)
A volatility measure based on the daily true range, used widely for stop placement and sizing.
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