Average Directional Index and Directional Movement
Calculate +DI, −DI, and ADX; distinguish directional dominance from trend strength; adjust the lookback and threshold; and compare the indicator in trending and ranging price series.
Understand what the indicator calculates, how its parameters affect it, and what it cannot establish by itself.
1
Directional movement
+DI and −DI compare smoothed positive and negative directional movement with smoothed true range — a bar’s own high-low span or its distance from the previous close, whichever is largest. Average True Range builds ATR from that same quantity.
2
Trend strength
ADX smooths the separation between +DI and −DI. It measures directional persistence, not bullish or bearish direction.
3
Threshold use
A threshold such as 20 or 25 is a rule choice, not a universal boundary. Rising and falling ADX also require context.
Interactive lesson
Change the inputs, inspect the calculation, and compare the indicator with the underlying price data.
Directional Movement SystemPrice, +DI, −DI, and ADX
+DI−DIADX
PriceDirection comes from price and DI relationship
Directional movement14-period ADX
Read ADX and DI together
Use separate outputs for separate questions: direction, strength, and change in strength.
1
Calculate directional movement
Compare current highs and lows with the prior bar to derive positive and negative movement.
2
Normalize with true range
Divide smoothed directional movement by smoothed true range so +DI and −DI are percentages of the movement available, comparable across instruments.
3
Calculate ADX
Smooth the relative separation between the two DI lines.
4
Interpret all three
Use +DI versus −DI for directional dominance and ADX for strength relative to the chosen threshold.
Direction versus trend strength
Score 0 / 0
Choose the best answer.
Lesson rule
ADX does not say up or down. Direction must come from price or +DI versus −DI; ADX only describes the strength of that directional separation.
Common mistakes
1
Calling high ADX bullishA strong downtrend can also produce a high ADX.
2
Treating a threshold as universal truthThreshold effectiveness depends on instrument, timeframe, method, and rule design.
3
Using ADX alone for entriesThe indicator does not define price location, invalidation, or direction by itself.
Completion standard
✓
Finish when you can state direction and strength separately.
Identify the dominant DI line, compare ADX with the chosen threshold, describe whether ADX is rising or falling, and explain why none of those observations alone is an entry.
Calculation note: This course uses Wilder-style smoothing for true range, directional movement, DX, and ADX. Long warm-up periods and seeding conventions can create platform differences.
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