What Is the Average Directional Index?

The reversal of the average direction index (ADX) at a high level is a sign indicating the end of a trend. The average direction index assessment (ADXR) is calculated from the evolution of the average direction index (ADX) in the movement index (DMI), and its formula is very simple. The calculation formula is as follows: ADXR = same-day average direction index (ADX) N-day average direction index (ADX) / 2

Average Direction Index Evaluation

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The reversal of the average direction index (ADX) at a high level is a sign indicating the end of a trend. Average Direction Index Assessment (ADXR)

The reversal of the average direction index (ADX) at a high level is a sign indicating the end of a trend. However, when it is truly convinced that ADX has turned around, it is often too late, which makes trouble in applying ADX.

The introduction of ADXR can make up for the above shortcomings of ADX to a certain extent. It can enhance the early confirmation of ADX reversal at high level.

The average direction index assessment (ADXR) is actually the average of ADX today and ADX on a previous day. ADXR fell in sync with ADX at a high level, which can increase the early confirmation that ADX has turned around. ADXR is a subsidiary product of ADX. It can only send an auxiliary and positive signal. It is not an indicator of market entry.

The average direction index assessment (ADXR) is determined by

In terms of chart analysis, the average direction index assessment (ADXR) needs to be combined with the trend indicator (DMI) to make an accurate analysis. The average direction index assessment (ADXR) is mainly used to assist the movement index (DMI) to make a clear signal.

1. When the average direction index assessment (ADXR) is above 25, the market entry method of the DMI can be used. If the average direction index assessment (ADXR) is below 20, the buying and selling method following the trend indicator (DMI) will be invalid.

2. If the average direction index (ADX) breaks through the average direction index evaluation (ADXR), the market trend will be very obvious, and a clear upward or downward market trend can be made (see Figure 7-1). The higher the average direction index (ADX) from the average direction index assessment (ADXR), the faster the market trend runs.

3. On the contrary, the closer the average direction index (ADX) is to the average direction index evaluation (ADXR), the more blurred the market trend. This situation often occurs when the average direction index evaluation (ADXR) is below 25. ^[1]