Developed by J. Welles Wilder, the Average Directional Movement Index (ADX) is an indicator for use with the Directional Movement Index and quantifies the strength and direction of a trend. The ADX consists of three components: the plus Directional Indicator (+DI), the minus Directional Indicator (-DI) and the Average Directional Indicator. The ADX is simply a modified moving average of DX.

To calculate up or down directional movement in a trend, a range is determined by comparing today's high and low with yesterdays close. If the largest part of today's range is above yesterday's range, the directional movement is plus. If the largest part of today's range is below yesterday's range, the directional movement is minus. If today's range is within yesterday's range, then directional movement is defined as zero. The average of the directional movement indicators is the ADX.

Read the ADX like an oscillator. A high positive value would be bullish. A low negative value is interpreted as bearish.