Average Directional Index (ADX)

Load the ADX indicator from studies. Kite gives you an option to change the look back period, by default the look back period is set

About: The Average Directional Index (ADX), Minus Directional Indicator (-DI) and Plus Directional Indicator (+DI) represent a group of directional movement indicators that form a trading system developed by Welles Wilder. The Average Directional Index (ADX) measures trend strength without regard to trend direction. The other two indicators, Plus Directional Indicator (+DI) and Minus Directional Indicator (-DI), complement ADX by defining trend direction. Used together, chartists can determine both the direction and strength of the trend. Source: stockcharts.com

What should you know?

ADX system has three components – ADX, +DI, and -DIADX is used to measure the strength/weakness of the trend and not the actual directionADX above 25 indicates that the present trend is strong, ADX below 20 suggest that the trend lacks strength. ADX between 20 and 25 is a grey areaA buy signal is generated when ADX is 25 and the +DI crosses over –DIA sell signal is generated when ADX is 25 and the –DI crosses over +DIOnce the buy or sell signal is generated, take the trade by defining the stop lossThe stop loss is usually the low of the signal candle (for buy signals) and the high of the signal candles ( for short signals)The trade stays valid till the stoploss is breached (even if the +DI and –DI reverses the crossover)The default look back period for ADX is 14 days


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