Average Directional Index (ADX)

The Average Directional Index (ADX) is a technical analysis indicator used to measure the strength of a trend in cryptocurrency prices. It was developed by J. Welles Wilder Jr. The ADX quantifies the strength of a trend regardless of its direction, indicating whether the trend is gaining or losing strength.

Here's the full definition:

"The Average Directional Index (ADX) in cryptocurrency is a technical analysis tool used to measure the strength of a trend. It ranges from 0 to 100, with higher values indicating a stronger trend. ADX values below 20 typically suggest a weak or non-existent trend, while values above 25 indicate a significant trend. Traders often use ADX in conjunction with other indicators to confirm trend strength and potential reversal points."

Example:

Let's consider Bitcoin's price movement over the past month. If the ADX value is 30, it suggests that Bitcoin's trend is gaining strength. Traders may interpret this as a signal to enter or maintain a position in Bitcoin, anticipating further price movement in the current direction.

Case:

In another scenario, Ethereum's price has been fluctuating within a narrow range, and the ADX value is consistently below 20. This indicates a lack of clear trend direction, signaling to traders that it may not be an optimal time to initiate new trades based solely on trend strength. Instead, they may look for other technical indicators or wait for clearer trend signals before making trading decisions.