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ADX is an indicator developed by Welles Wilder and introduced back in 1978. For long term trend followers, ADX is so important, such a key to the kingdom, that I have decided to treat it by itself.

ADX (Average Direction Movement Index) is, at its core, a measurement of the strength of trend. The calculations are not overly difficult, and if you want to understand the math, it is described on many financial websites.

ADX: The Trend Followers Best Friend

Chuck Le Beau is one of the worlds leading authority on ADX. He has built some classic systems around this indicator, that have stood the test of time including systems that have been top-rated in the Futures Truth rating service.

Chuck uses ADX alternately as a set-up and entry criteria in various systems. The power of ADX lies in its smoothing and its persistency. The smoothing minimizes false signals from whipsaws and the persistency comes from being able to stick with a trend through modest pullbacks.

If you have any desire to be an intermediate to long-term term trader, you really owe it to yourself to spend some time with Chuck, and study ADX with the master.

Lets look at our market model questions for ADX:

Is it theoretically credible? Absolutely. This indicator has very strong technical support. And it tests well across many time frames.

Whos it most useful for? Clearly this is most useful for long term trend followers. However, I have read some articles where ADX is used in shorter (even intra-day) time frames.

How Fanatic are the fans? A very behind the scenes bunch. With the notable exception of Chuck, very few people are out there touting ADX.

Is it being used by real-life traders? Yes. Many folks keep this on their charts and use it in system building.

Click the ADX Indicator header link above to learn more about how the ADX Indicator can help you in your trading.

Good day and good trading.

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