Average Directional Index Rating

Average Directional Index Rating

The Average Directional Index Rating or ADXR is simply a smoothed version of the Average Directional Index or ADX that was developed by Welles Wilder. It averages the day’s ADX with the ADX N days ago. It measures the change of momentum in ADX.

ADXR= (ADX+ADX_(N ago))/2

The use of ADXR is similar to the ADX. The higher the ADX (i.e. above 25), the stronger the trend of the market is, whether an up trend or a down trend. The lower the ADX (i.e. below 25), it denotes a weakening trend and a possible trend reversal.

ADXR is a lagging indicator as it waits for the ADX to generate signals first. When the ADX rises above the ADXR, it is a buy signal. When the ADX falls below the ADXR, it is a sell signal.

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