ADX is Non-Directional

Invest Like A Pro! > Indicators > ADX is Non-Directional

The interesting and confusing fact about this indicator is that ADX is indifferent as to direction.  The ADX line will rise if there is a strong trend and it does not matter whether that trend is to the upside or to the downside.  It is based on the difference between the two DI lines regardless of which of the two is on top.

There are two weekly charts of Microsoft Corp. (MSFT) above.  ADX is rising in both cases.  On the left, the stock is rising and +DI is separating from -DI and this is causing the ADX (blue) to rise.  On the right, -DI is separating away from +DI and the ADX line is rising. 

This is a powerful indicator because you need real buying power to get it to move.  Once you get used to the fact that rising = strong, ADX can be very helpful in the stock selection process.  Personally, I believe this is the best indicator for determining which stock to play.  If I have 2 choices where the overall price structure is the same and MA lines are generally the same, I will go to ADX to determine which is the stronger trend.  Stocks with high ADX readings tend to move faster and stronger than stocks with low ADX readings.

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