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Investor Education Momentum Indicators Average Directional Movement Index

Financial Indicator

Equity momentum-indicators tool provides you with the Momentum Indicators execution environment for running Average Directional Movement Index indicator against Equity. Momentum indicators of Equity are pattern recognition functions that provide distinct formation on Equity potential trading signals or future price movement. Analysts can use these trading signals to identify current and future trends and trend reversals to provide buy and sell recommendations. Please specify Time Period to run this model.
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The average directional index (ADX) measures the strength of a prevailing trend of Investor Education and whether movement exists in the market. The ADX is measured on a scale of 0 to 100. A low Investor Education ADX value usually indicates a non-trending market with low volumes, whereas a cross above 20 may indicate the start of a trend. If the ADX is over 40 and begins to fall, it can indicate the slowdown of a current trend. This indicator can also be used to identify non-trending markets, or a deterioration of an ongoing trend. Although market direction is important in its calculation, the ADX is not a directional indicator. View also all equity analysis

Average Directional Movement Index In A Nutshell

There are three components to this indicator, and they are plus directional movement, minus directional movement, and the average directional index. How to read that is the movement is deemed positive if taking the current high and subtracting the prior high is higher than the prior low minus the current low. Negative is if the prior low minus the current low is bigger that the current high subtracting the prior high.

Created by Welles Wilder, the Average Directional Index or ADX for short, is an indicator that helps the investor or trader look for movement within a market. This indicator is helped to measure the potential shift of a trend and even the strength of the move. Strength can be used in different terms such as volume strength, money flow strength, or trading range.

Closer Look at Average Directional Movement Index

Now that you have an idea of what it means, knowing how to use it is the most important part. The ADX is what determines if a potential trend is forming. If the ADX is above 20, there is the potential for a trend. If the ADX is 20 or below, that means a trend may not be occurring or be strong. The direction of the trend depends on whether the plus or minus is nearing the higher digits.  

Be sure to test out the indicator on your current setup and see if it fits. As with any indicator, it is not set in stone, but rather a tool to help notify you in a potential shift in the market. This is a popular tool and there is loads of research available for you to review. Also, check out the tools on MacroAxis to hone in your trading.

Additional Technical Research

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