Directional Movement Index + ADX & Keylevel Support

The Directional Movement Index + ADX & Keylevel Support indicator provides a comprehensive trend strength and direction analysis tool by combining standard DMI/ADX calculations with a customizable threshold to identify high-momentum market phases.

Usage

The Usage section describes how the script can be used to identify market conditions and potential entry or exit points. The tool consists of three primary lines—ADX (blue), +DI (green), and -DI (red)—alongside a horizontal Key Level.

• Trend Strength: The ADX line measures the strength of a trend regardless of direction. When the ADX is above the Key Level (typically set between 23 and 25), it indicates a strong trending environment. Conversely, an ADX below this level suggests a ranging or weak market.
• Trend Direction: Direction is determined by the relationship between the +DI and -DI lines. If the +DI is above the -DI, the prevailing momentum is bullish. If the -DI is above the +DI, the momentum is bearish.
• Signal Filtering: A common application involves looking for +DI/-DI crossovers only when the ADX is above the Key Level, ensuring that trades are taken during periods of established trend strength.

Details

The script is based on the standard Average Directional Index (ADX) and Directional Movement Index (DMI) logic developed by J. Welles Wilder. It calculates the positive (+DI) and negative (-DI) directional movement based on the relative movement of highs and lows over a specified period.

The ADX component is derived from the smoothed moving average of the Directional Index (DX). The inclusion of a static Key Level plot allows traders to visually confirm when volatility and momentum have reached a significant threshold. The script also includes built-in alert conditions for DI crossovers and ADX threshold breaches to assist in real-time monitoring.

Settings

• ADX Smoothing: Sets the lookback period for the ADX calculation. Higher values result in a smoother, slower-reacting line.
• DI Length: Determines the period used to calculate the +DI and -DI components.
• Key level for ADX: Sets the horizontal threshold value (defaulted to 23). This level serves as the benchmark for identifying a "strong" trend.

FAQ

What does it mean when the ADX is above the Key Level? When the ADX line crosses above the Key Level, it indicates that the market is entering a strong trending phase. It does not indicate direction, but rather that the current move has significant momentum.

How do I interpret a DI crossover? A Bullish DI Cross occurs when the +DI (green) crosses above the -DI (red). A Bearish DI Cross occurs when the -DI (red) crosses above the +DI (green). These are often used as signals for potential trend reversals.

How can I access this tool? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.