Wilder's DMI (ADX)

AAA

DEFINITION of 'Wilder's DMI (ADX)'

Three lines compose the Directional Movement Indicators (DMI): ADX, DI+ and DI-. The Average Directional Index (ADX) line shows the strength of the trend. The higher the ADX value, the stronger the trend. The Plus Direction Indicator (DI+) and Minus Direction Indicator (DI-) show the current price direction. When the DI+ is above DI-, current price momentum is up. When the DI- is above DI+, current price momentum is down.

INVESTOPEDIA EXPLAINS 'Wilder's DMI (ADX)'

The indicator was developed by J. Welles Wilder, and shows the strength of a trend- either up or down. According to Wilder, a trend is present when the ADX is above 25.

If DI+ is above DI-, an ADX reading of 25 or higher indicates a strong uptrend. If DI- is above DI+, an ADX reading of 25 or higher indicates a strong downtrend. The ADX may stay above 25 even when the trend reverses. Since ADX is non-directional, this shows the reversal is as strong as the prior trend.

Many traders use 20 to indicate a trend, instead of 25.

RELATED TERMS
  1. Market Indicators

    A series of technical indicators used by traders to predict the ...
  2. Composite Index of Leading Indicators

    An index published monthly by the Conference Board used to predict ...
  3. Business Cycle Indicators - BCI

    Composite of leading, lagging and coincident indexes created ...
  4. Composite Index Of Lagging Indicators

    An index published monthly by the Conference Board that is used ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses ...
  6. Composite Index of Coincident Indicators

    An index published by the Conference Board that is a broad-based ...
RELATED FAQS
  1. How is the Average Directional Index (ADX) calculated and what is the formula?

    Learn about average directional index, or ADX, indicators, including the calculations for various elements of the ADX technical ...
Related Articles
  1. Trading Strategies

    Using Compound Indicators To Predict Market Fluctuations

    Learn how to combine average true range, simple moving average and Bollinger band indicators to gauge market volatility.
  2. Active Trading

    Using Trading Indicators Effectively

    Select multiple indicators, avoid information overload and optimize indicators to effectively use technical analysis tools.
  3. Forex Education

    Forex Market Sentiment Indicators

    Sentiment Indicators are another tool that can alert traders to extreme conditions.
  4. Options & Futures

    Trading Around Key Options Indicators

    Learn the key economic indicators to help predict market movement.
  5. Fundamental Analysis

    Deadly Flaws In Major Market Indicators

    These indicators give investors and experts some data to work with, but they're far from perfect measures.
  6. Technical Indicators

    Using Technical Indicators To Develop Trading Strategies

    Unfortunately, there is no perfect investment strategy that will guarantee success, but you can find the indicators and strategies that will work best for your position.
  7. Fundamental Analysis

    Is Apple's Stock Over Valued Or Undervalued?

    Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only systematic risk. Applying Apple, we get annual expected return of about ...
  8. Trading Strategies

    Trading On The Psychology Of Round Numbers

    Price action around big round numbers, like 10, 100 and 12000 set up special trading opportunities that take advantage of shifting crowd psychology.
  9. Options & Futures

    The Most Important Technical Indicators For Binary Options

    Trading binary options is not for the novice, but if you're ready to delve in, get to know the best technical indicators.
  10. Chart Advisor

    Commodity Traders Are Using Momentum To Profit From These Stocks

    Active traders are drawn to momentum strategies. These momentum winners of 2015 are worth a trader's second look.

You May Also Like

Hot Definitions
  1. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  2. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  3. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  4. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  5. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  6. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
Trading Center