Average Directional Index (ADX)

Understand the essential crypto terminology for AXE Protocol, including key concepts, definitions, and terms vital for navigating this blockchain ecosystem efficiently.

Average Directional Index (ADX) is a metric used to assess the strength of a trend in the price movements of cryptocurrencies. It ranges from 0 to 100, with higher values indicating stronger trends. The ADX does not indicate the trend’s direction—whether it is upward or downward—but rather how strong the trend is. Typically, an ADX value above 20 or 25 signals a strong trend, while values below these thresholds suggest a weak or non-existent trend. The ADX is calculated using two other indicators, the Plus Directional Indicator (+DI) and the Minus Directional Indicator (-DI). These indicators help traders identify whether the market is moving upwards or downwards. Traders often combine the ADX with these directional indicators to make informed decisions. For instance, entering a position when the +DI crosses above the -DI while the ADX is rising can signal a strong buying opportunity. Conversely, when the -DI crosses above the +DI, it might indicate a selling opportunity. Overall, ADX serves as a valuable tool for traders looking to navigate market volatility and trends.

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