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Directional Movement Index

A pair of lines measuring the share of recent range covered by upward versus downward movement, from which ADX is calculated.

DI+ measures how much of the recent true-range came from higher highs and DI- from lower lows. When DI+ is above DI-, upward movement has dominated. adx is then built from the normalised gap between them.

Crossovers of DI+ and DI- are sometimes traded as entries, usually with a requirement that ADX be above a threshold so that the signal only fires in trending conditions.

Like every Wilder indicator it is smoothed and therefore late, and the crossover version generates many signals in choppy markets. Its more defensible use is diagnostic: seeing which side of the range is doing the work, rather than as a trigger.

Related: adx, true-range, trend-following, whipsaw, momentum-indicator

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

A range beside a trendOne chart swinging between a flat floor and ceiling, another stepping upwards inside a pair of sloping lines.Range-boundresistancesupportprice bounces between two levelsTrendingthe trend channelhigher highs and higher lowsA range has two flat edges; a trend has two sloping ones.
Range versus trend. On the left price keeps bouncing between the same floor and ceiling, which is a range. On the right each high and each low is higher than the last, inside a pair of sloping lines called a channel.

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