Average Directional Index (ADX)
An indicator used to quantify trend strength without regard to trend direction.
Usage
Use to determine if the market is trending or ranging. ADX values above 25 indicate a strong trend, while values below 20 indicate a weak or non-trending market.
Background
Developed by J. Welles Wilder, the ADX is derived from two other indicators, also developed by Wilder: the Positive Directional Indicator (+DI) and the Negative Directional Indicator (-DI). While +DI and -DI indicate trend direction, ADX measures the strength of that trend. — StockCharts ChartSchool
Parameters
timeperiod(default: 14): Lookback period
Formula
[ ADX = 100 \times \frac{\text{EMA}(|(+DI) - (-DI)| / |(+DI) + (-DI)|, n)}{n} ]