ADX

Average Directional Index was developed by Welles Wilder, and is used to measure the strength and integrity of a trending market. This is a momentum indicator that can be used in conjunction with many other indicators. The higher the number, the stronger the trend.

The direction of the trend does not matter. The indicator does not give bullish or bearish readings it only gives an assessment of the strength of the trend. ADX acts as an oscillator that fluctuates between 0 and 100. Readings above 60 are rare. Ratings below 20 indicate a weak trend, ratings above 40 indicate a strong trend. It can also be used to identify changes in a market from a non trending (channeling) to a trending market. ADX strengthens to above 20 would lead you to believe that the trading range or channel is done and a up or down trend might be developing.