[{"type":"paragraph","children":[{"text":"JuExchange Academy is the world’s first online academy to offer comprehensive education on crypto-native indicators. It features the most extensive technical indicator tutorials and is the most detailed online learning platform for market technical analysis. Here, you’ll find hundreds of courses on commonly used indicators, along with nearly every known crypto-native indicator tutorial."}]},{"type":"paragraph","children":[{"text":""}]},{"type":"paragraph","children":[{"text":"Today we’re going to learn about the Average Direction Index (ADX). The Average Directional Index (ADX) is one of the most reliable trend strength indicators in technical analysis. Developed by J. Welles Wilder in the late 1970s, ADX was introduced in his book “New Concepts in Technical Trading Systems”, alongside other classic tools like Relative Strength Index (RSI), Parabolic SAR, and Average True Range (ATR)."}]},{"type":"paragraph","children":[{"text":""}]},{"type":"paragraph","children":[{"text":"Unlike indicators that focus on price direction, the ADX measures the strength of a trend, whether bullish or bearish. In other words, it tells you how powerful a trend is, not its direction. This makes it highly valuable in both traditional markets and crypto trading, where volatility and false breakouts are common."}]},{"type":"paragraph","children":[{"text":""}]},{"type":"heading-two","children":[{"text":"The History of ADX","bold":true}]},{"type":"paragraph","children":[{"text":"ADX was born out of Wilder’s observation that traders often misread trend movements, entering trades prematurely or holding losing positions too long. He wanted an indicator that could quantify trend strength objectively."}]},{"type":"bulleted-list","children":[{"type":"list-item","children":[{"text":"1978: Wilder introduces ADX along with +DI and -DI, forming the Directional Movement System."}]},{"type":"list-item","children":[{"text":"Original use case: Commodities and futures markets, where trends can be long-lasting but also subject to whipsaws."}]},{"type":"list-item","children":[{"text":"Modern adoption: ADX is widely applied in stocks, forex, commodities, and cryptocurrencies. In crypto markets, ADX is particularly useful for filtering noise in highly volatile assets like Bitcoin, Ethereum, and altcoins."}]}]},{"type":"heading-two","children":[{"text":"","bold":true}]},{"type":"heading-two","children":[{"bold":true,"text":"How ADX is Calculated"}]},{"type":"paragraph","children":[{"text":"ADX calculation involves several steps, using both price highs, lows, and closes:"}]},{"type":"numbered-list","children":[{"type":"list-item","children":[{"text":"Calculate Directional Movements","bold":true}]}]},{"type":"bulleted-list","children":[{"type":"list-item","children":[{"text":"+DM (Positive Directional Movement) = today’s high − yesterday’s high"}]},{"type":"list-item","children":[{"text":"−DM (Negative Directional Movement) = yesterday’s low − today’s low"}]},{"type":"list-item","children":[{"text":"Only the greater of the two is considered, and negatives are set to zero."}]}]},{"type":"numbered-list","children":[{"type":"list-item","children":[{"text":"Calculate True Range (TR)","bold":true}]}]},{"type":"bulleted-list","children":[{"type":"list-item","children":[{"text":"TR = max(high − low, |high − previous close|, |low − previous close|)"}]},{"type":"list-item","children":[{"text":"TR captures the total range of price movement, including gaps."}]}]},{"type":"numbered-list","children":[{"type":"list-item","children":[{"text":"Smooth +DM, −DM, and TR","bold":true}]}]},{"type":"paragraph","children":[{"text":"Typically using a 14-period Wilder’s smoothing (similar to EMA but slightly different)."}]},{"type":"numbered-list","children":[{"type":"list-item","children":[{"text":"Compute Directional Indicators (+DI and −DI)","bold":true}]}]},{"type":"bulleted-list","children":[{"type":"list-item","children":[{"text":"+DI = (Smoothed +DM ÷ Smoothed TR) × 100"}]},{"type":"list-item","children":[{"text":"−DI = (Smoothed −DM ÷ Smoothed TR) × 100"}]}]},{"type":"numbered-list","children":[{"type":"list-item","children":[{"text":"Compute DX and ADX","bold":true}]}]},{"type":"bulleted-list","children":[{"type":"list-item","children":[{"text":"DX = |+DI − −DI| ÷ (+DI + −DI) × 100"}]},{"type":"list-item","children":[{"text":"ADX = smoothed moving average of DX"}]}]},{"type":"numbered-list","children":[{"type":"list-item","children":[{"text":"Key point","bold":true}]}]},{"type":"paragraph","children":[{"text":"ADX is always positive. A rising ADX indicates a strengthening trend, while a falling ADX indicates weakening momentum."}]},{"type":"heading-two","children":[{"text":"","bold":true}]},{"type":"heading-two","children":[{"bold":true,"text":"Interpreting ADX"}]},{"type":"bulleted-list","children":[{"type":"list-item","children":[{"text":"ADX < 20 → Weak trend or sideways market. Market is choppy; trend-following strategies may fail."}]},{"type":"list-item","children":[{"text":"ADX 20–40 → Moderate trend; trend-following strategies start to work."}]},{"type":"list-item","children":[{"text":"ADX 40–60 → Strong trend; good for swing or trend traders."}]},{"type":"list-item","children":[{"text":"ADX > 60 → Very strong trend; may indicate trend exhaustion soon."}]}]},{"type":"heading-four","children":[{"text":"Combining +DI and −DI","bold":true}]},{"type":"bulleted-list","children":[{"type":"list-item","children":[{"text":"+DI > −DI and ADX rising → Bullish trend strengthening."}]},{"type":"list-item","children":[{"text":"−DI > +DI and ADX rising → Bearish trend strengthening."}]},{"type":"list-item","children":[{"text":"ADX falling → Trend losing strength, regardless of +DI/−DI position."}]}]},{"type":"heading-two","children":[{"text":"","bold":true}]},{"type":"heading-two","children":[{"bold":true,"text":"Using ADX in Crypto Trading"}]},{"type":"paragraph","children":[{"text":"Crypto markets are highly volatile and prone to sudden price spikes or dumps. ADX can help:"}]},{"type":"numbered-list","children":[{"type":"list-item","children":[{"text":"Filter false signals: Avoid entering positions in low-ADX environments (<20)."}]},{"type":"list-item","children":[{"text":"Trend confirmation: Only take trades when ADX rises above 20–25."}]},{"type":"list-item","children":[{"text":"Swing entries: Use ADX to ride the trend and time entries/exits."}]},{"type":"list-item","children":[{"text":"Complementary tools: Combine ADX with moving averages, Bollinger Bands, or Donchian Channels for better precision."}]}]},{"type":"paragraph","children":[{"text":"Example Strategy","bold":true}]},{"type":"bulleted-list","children":[{"type":"list-item","children":[{"text":"Buy signal: +DI > −DI and ADX > 25"}]},{"type":"list-item","children":[{"text":"Sell signal: −DI > +DI and ADX > 25"}]},{"type":"list-item","children":[{"text":"Exit: ADX starts declining from high levels (>50)"}]}]},{"type":"paragraph","children":[{"text":"Tip:","bold":true},{"text":" In crypto, high ADX readings can persist longer due to strong market sentiment; always manage risk with stop-loss orders."}]},{"type":"heading-two","children":[{"text":"","bold":true}]},{"type":"heading-two","children":[{"bold":true,"text":"Common Pitfalls"}]},{"type":"numbered-list","children":[{"type":"list-item","children":[{"text":"ADX does not indicate trend direction – must combine with +DI/−DI or price action."}]},{"type":"list-item","children":[{"text":"Avoid trading in low ADX conditions – markets may be too choppy."}]},{"type":"list-item","children":[{"text":"High ADX ≠ guaranteed continuation – extreme trends can reverse."}]},{"type":"list-item","children":[{"text":"Overreliance on ADX alone – always consider volume, news, and market context."}]}]},{"type":"heading-two","children":[{"text":"","bold":true}]},{"type":"heading-two","children":[{"bold":true,"text":"Advanced Applications"}]},{"type":"numbered-list","children":[{"type":"list-item","children":[{"text":"Divergence Analysis: Compare ADX with price movement to spot trend weakening."}]},{"type":"list-item","children":[{"text":"Trend Strength Comparison: Use ADX across multiple timeframes to find consistent trends."}]},{"type":"list-item","children":[{"text":"Crypto-Specific Use:"}]}]},{"type":"bulleted-list","children":[{"type":"list-item","children":[{"text":"Detect altcoin breakouts during low-ADX consolidation."}]},{"type":"list-item","children":[{"text":"Identify trend exhaustion before large pullbacks in high-volatility coins."}]}]},{"type":"heading-two","children":[{"text":"","bold":true}]},{"type":"heading-two","children":[{"bold":true,"text":"Conclusion"}]},{"type":"paragraph","children":[{"text":"The Average Directional Index (ADX) remains one of the most reliable trend strength indicators in technical analysis. In crypto trading, where volatility is high and trends can be both rewarding and dangerous, ADX helps traders:"}]},{"type":"bulleted-list","children":[{"type":"list-item","children":[{"text":"Identify trend strength；"}]},{"type":"list-item","children":[{"text":"Filter out market noise；"}]},{"type":"list-item","children":[{"text":"Make better-informed trading decisions."}]}]},{"type":"paragraph","children":[{"text":"Key takeaway: ADX is not about predicting price direction but about understanding the force behind a trend. Combining it with +DI/−DI, price action, and other technical tools can significantly improve trading performance."}]},{"type":"paragraph","children":[{"text":"\n"},{"type":"topic","character":"JuExchange","children":[{"text":""}]},{"text":" "},{"type":"topic","character":"Blockchain101","children":[{"text":""}]},{"text":" \n"}]}]