ADX with Signals

The ADX with Signals indicator tool provides a comprehensive visual representation of trend strength and direction by combining the Average Directional Index (ADX) with Directional Indicators (DI+ and DI-).

Usage

The ADX with Signals tool is designed to identify the presence and intensity of a market trend. Users can interpret the indicator based on specific ADX level milestones:

• Below 20: The market is currently not trending or is in a consolidation phase.
• Cross above 20: Signifies that a new trend is emerging, suggesting traders may look for entries in the direction of the price movement.
• Between 20 and 40: Confirmation of an emerging trend.
• Above 40: Indicates a very strong trend is in progress.
• Above 50: Signifies an extremely strong trend.
• Above 70: A rare "Power Trend" state.

The indicator also generates signals based on the relationship between the directional components. A bullish signal is highlighted via background coloring when the DI+ is greater than the DI- and the ADX is also higher than the DI-, suggesting strong upward momentum.

Details

The script implements J. Welles Wilder's directional movement logic. It calculates the True Range (TR) and Directional Movement (+DI and -DI) for each period. These values are smoothed using Wilder’s Moving Average (RMA). The final ADX is derived from the Directional Movement Index (DX), which represents the percentage difference between +DI and -DI. This implementation ensures that users get a standard, mathematically accurate representation of trend strength while benefiting from integrated signal logic.

Settings

ADX Smoothing

• ADX Smoothing (14): Determines the period used to smooth the DX values into the final ADX line. Higher values result in a smoother line but more lag.
• DI Length (14): Sets the lookback period for calculating the +DI and -DI components.
• Threshold (30): Defines the horizontal reference line on the oscillator, used to gauge significant trend strength.

FAQ

How do I use the signals provided by this tool?

The signals are based on crossovers of the DI lines filtered by the ADX strength. When DI+ is above DI- and ADX is above DI-, it suggests a confirmed bullish trend environment.

What are the default levels for ADX?

While the script uses a default threshold of 30, standard interpretations often look at the 20 level for trend emergence and 40+ for high-strength trends.

How can I access ADX with Signals?

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