Average Directional Index

The Average Directional Index (ADX) is a technical indicator used by traders to measure the strength of a market trend. It does not show whether the price is going up or down but simply tells how strong the trend is. The ADX is usually shown as a line on a chart, with values ranging from 0 to 100. A low ADX value (below 20) means the market is moving sideways or has a weak trend, while a high ADX value (above 25 or 30) indicates a strong trend, either upward or downward.

The ADX is often used together with two other lines, called the +DI (Positive Directional Indicator) and -DI (Negative Directional Indicator). These lines help traders see the direction of the trend, while the ADX itself shows the strength. Traders use the ADX to decide whether to trade with the trend or wait until the market becomes clearer. It is a popular tool in trend-following strategies because it helps avoid trading in choppy, unclear market conditions.

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