cRYPTO Glossary

The Average Directional Index (ADX) is a technical analysis indicator used to measure the strength of a market trend. It is represented by a numerical value typically ranging from 0 to 100, with higher values indicating a stronger trend.

Explanation:

• Market trend strength: ADX quantifies the strength of a trend, whether it is uptrending or downtrending, by analyzing the price movement over a specified period.
• Price moving averages: ADX is derived from the average of price movements, focusing on both positive (+DI) and negative (-DI) directional indicators to gauge the trend's strength.
• Numeric scale: ADX values range between 0 and 100. A higher ADX value suggests a stronger trend, while lower values indicate weaker or less defined trends.
• Interpretation: ADX values above 25 typically suggest a strong trend, while values below 20 indicate a weak or non-existent trend.

Key Points:

• Indicator calculation: ADX is calculated using the smoothed average of directional movement over a specified period (commonly 14 days).
• Technical analysis tool: Traders use ADX to confirm the presence of a trend and assess its strength before making trading decisions.
• Combined with other indicators: ADX is often used in conjunction with other technical indicators to enhance trading signals and improve decision-making accuracy.