<p>The Average Directional Index (ADX) is a technical indicator used to measure the strength of a trend. It was developed by J. Welles Wilder Jr. and is widely used in trading to identify the presence or strength of a trend, rather than its direction.</p>

<h2>How It Works</h2>

<p>The ADX indicator is calculated using a 14-period average of the difference between the highest and lowest prices (true range). It oscillates between 0 and 100, with values above 25 indicating a strong trend, and values below 25 indicating a weak trend or no trend. Here's a breakdown of the calculation:</p>

<ul>
  <li><strong>True Range (TR)</strong>: The greatest of the current high-low, the current high minus the previous close, or the current low minus the previous close.</li>
  <li><strong>+DI (Positive Directional Indicator)</strong>: 14-period smoothed average of the TR when the up-move is greater than the down-move.</li>
  <li><strong>-DI (Negative Directional Indicator)</strong>: 14-period smoothed average of the TR when the down-move is greater than the up-move.</li>
  <li><strong>DX (Directional Index)</strong>: (|+DI - -DI| / (+DI + -DI)) * 100</li>
  <li><strong>ADX</strong>: 14-period smoothed average of DX</li>
</ul>

<h2>Why It Matters for Traders</h2>

<p>The ADX is a valuable tool for traders as it helps to:</p>

<ul>
  <li>Identify the presence or strength of a trend, allowing traders to make more informed decisions about when to enter or exit trades.</li>
  <li>Filter out weak trends, reducing the number of false signals generated by other indicators.</li>
  <li>Confirm trend direction when used in conjunction with other indicators, such as the +DI and -DI lines.</li>
</ul>

<h2>Example</h2>

<p>Consider the following example on the STB Provider's MetaTrader 5 platform. The EUR/USD pair shows a strong uptrend with ADX above 25. The +DI line crosses above the -DI line, confirming the uptrend. A trader might use this information to enter a long position, expecting the trend to continue.</p>

<table>
  <tr>
    <th>ADX</th>
    <th>+DI</th>
    <th>-DI</th>
  </tr>
  <tr>
    <td>35.78</td>
    <td>28.45</td>
    <td>17.33</td>
  </tr>
</table>

<h2>Key Takeaways</h2>

<ul>
  <li>The ADX measures the strength of a trend, not its direction.</li>
  <li>ADX values above 25 indicate a strong trend, while values below 25 indicate a weak trend or no trend.</li>
  <li>The ADX is calculated using a 14-period average of the true range and is smoothed to reduce volatility.</li>
  <li>The ADX is most effective when used in conjunction with other indicators, such as the +DI and -DI lines, to confirm trend direction.</li>
</ul>