ADX stands for Average Directional Movement Index, which is a technical analysis indicator used by traders to determine the strength of a trend. It was developed by J. Welles Wilder in 1978 as an indicator of trend strength in a series of prices of a financial instrument. The ADX is a combination of two other indicators developed by Wilder, the positive directional indicator (+DI) and negative directional indicator (-DI), which are used to help assess whether a trade should be taken long or short, or if a trade should be taken at all.

The ADX is calculated by taking the smoothed moving average of the absolute value of (+DI − -DI) divided by (+DI + -DI) . The ADX is non-directional, meaning it registers trend strength whether price is trending up or down. The ADX works best when combined with other technical indicators, like the relative strength index (RSI), which can help with entries and exits by giving a time-based component to the trend.

The ADX does not indicate trend direction or momentum, only trend strength. It is a lagging indicator, meaning a trend must have established itself before the ADX will generate a signal that a trend is under way. ADX will range between 0 and 100, with readings below 20 indicating trend weakness, readings above 40 indicating trend strength, and readings above 50 indicating an extremely strong trend.

In summary, ADX is a technical analysis indicator used by traders to determine the strength of a trend. It is calculated by taking the smoothed moving average of the absolute value of (+DI − -DI) divided by (+DI + -DI). The ADX does not indicate trend direction or momentum, only trend strength, and is a lagging indicator. ADX will range between 0 and 100, with readings below 20 indicating trend weakness, readings above 40 indicating trend strength, and readings above 50 indicating an extremely strong trend.