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AVE DIRECTIONAL MOVEMENT


ADX

04/02/00 12:27:51 PM
by Jason K. Hutson

ADX

Security:   N/A
Position:   N/A

The Average Directional Movement Index is an indicator that is designed to rate the directional
movement of stocks or commodities. The index uses a scale of zero to one hundred to rate the trend
intensity of a tradable. Various markets can be followed and evaluated for trend intensity. After rating
each market, you use trend-following systems on the tradeables with a high rating. The tradeables with a
low rating on the ADX scale should be followed using a trading range system.

Determining the ADX value is a five-step process and begins with an evaluation of the basic directional
movement of the market. There will be only one directional movement value for each day. First, today's
high is compared with yesterday's high. This difference is defined as the plus directional movement (+DM). Comparing today's low with yesterday's low defines the minus directional movement (-DM). Minus DM is for the purpose of labeling the value only; the value of the -DM is always a positive number. Whichever reading is larger, +DM or -DM, will be used for each day.



Jason K. Hutson

Traders.com Staff Writer. Enjoys trendlines, support and resistance, moving averages, RSI, MACD, ADX, Bollinger bands, parabolic SAR, chart formations, and volume analysis.

Title: Industrial Engineer
Company: Technical Analysis, Inc.
Address: 4757 California Ave SW
Seattle, WA 98116
Phone # for sales: 206 938 0570
Website: Traders.com
E-mail address: JasonHutson@Traders.com

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