The above chart it the visualization of the ADX calculation: Well, that my friends has been well documented across the internet and unless you are a quant, you should really spend your time learning how to interpret the indicator and abandon manual calculations. So then how are the DI- and DI+ lines calculated? Kind of throws you a little right? You would expect to only see the ADX line, but the ADX itself is the smoothed average of the difference of the DI+ and DI.

The ADX is comprised of the following components: In this article, we will briefly touch upon the background for the ADX indicator, but we will quickly shift our attention towards using ADX with other Welles indicators to assess if we are able to define an edge. That is the ADX is a part of a suite of indicators created by Welles to analyze the market. Most articles hit on the two areas I just mentioned, but none managed to see the bigger picture. It’s clear that Wilder was attempting to do two things with the ADX indicator: The ADX (Average Directional Index) is a creation from technical analysis legend J.