Technical indicator ADX defines price trend and its direction. It was designed and described by Welles Wilder (New Concepts of Technical Trading Systems).
This method applies comparison of 14-grade +DI and 14-grade –DI, or by plotting indicators one on another, or by subtracting +DI from -DI. If +DI is higher, trader would buy, if –DI is, they would sell.
In order to minimize misleading indicators, Welles Wilder added “the extreme points rule” to this system. Once –DI crosses +DI, the extreme point should be marked. Once +DI is exceeding –DI, the minimal intersection point is considered to be the extreme point. Once the -DI is exceeding, the intersection point is considered to be the minimal. These points mark points of entering markets.
