ADX = modify moving average of DX<\/p>\n
DX = 100 x ( (+DI – -DI)\/( +DI + -DI) )<\/p>\n
+DI = +DMn \/ TRn , -DI = -DM \/ TRn<\/p>\n
+DM = Ht – Ht-1 , -DM = Lt – Lt-1<\/p>\n
CL = Ct – Ct-1<\/p>\n
TR = largest of +DM,-DM ,and CL<\/p>\n
where :<\/p>\n
+DI = current positive directional index<\/p>\n
-DI = current negative directional index<\/p>\n
+DMn = current modified moving average of +DM<\/p>\n
+DM = current positive directional movement value<\/p>\n
Ht = current high<\/p>\n
Ht-1 = previous high<\/p>\n
Lt = current low<\/p>\n
Lt-1 = previous low<\/p>\n
-DMn = current modified moving average of -DM<\/p>\n
-DM = current negative directional movement value<\/p>\n
TRn = current modified modified moving average of the true range<\/p>\n
TR = true range<\/p>\n
n = number of periods<\/p>\n
DX = current DX<\/p>\n
Implementation<\/h2>\n
A move below 40 from above indicates that the trend is slowing. Since most option strategies rely on large price movements in short timeframes, a slowing trend is bad. Therefore an ADX move below 40 would indicate that it is time to close positions.<\/p>\n
Conversely, an ADX indicator move above 20 from below indicates that the sideways trading is over, and a new trend is developing. This would indicate that it is time to make a move, either bullish or bearish.<\/p>\n
Also, signals can be obtained by looking at where the positive directional index +DI (green) and negative directional index -DI (red) lines cross each other. When the +DI crosses above the -DI from below, it is a bullish signal. When the -DI crosses above the +DI from below, it is bearish.<\/p>\n
![\"\"](\"https:\/\/www.niftylivecharts.com\/blog\/wp-content\/uploads\/2010\/02\/44006_f520.jpg\" "\\"44006_f520\\"")
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