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Welles Wilder's Average Directional Index (ADX):

Welles Wilder, writes about this indicator in his book "Directional movement is the most fascinating concept I have studied." Wilder designed ADX with commodities in mind, but this indicator can also be applied to stocks. Commodities tend to be more volatile with short and strong trends. Although for volatile stocks it can be used for generating buy and sell signals however it is not suitable to trade in low volatility stocks with its generated buy or sell signals.

Having said that, The Average Directional Index (ADX) can still be used to measure the strength or weakness and direction of a trend in stocks. We don't use its buy or sell signals instead we use it in combination with a signal generating indicator such as Parabolic SAR to make a complete trading system.

Disclaimer: Stock market is a risky place and trading based on this indicator is totally on your own risk. We assume absolutely no responsibility if you bear losses in your trading.


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