Adx Dmi Trend (Trend)

Wilder's Directional Movement system: buys when +DI is above -DI while ADX confirms the trend is strong (above 25), and sells when +DI crosses back below -DI.

How It Works

1. From each bar's high and low, compute the 14-bar +DI and −DI — how much of the recent movement has been upward versus downward — and ADX, which measures how decisively one side is winning.
2. Buy when +DI sits above −DI and ADX is above 25 at the same time: the direction is up and the move is strong enough to be a trend rather than noise inside a range.
3. Sell when +DI crosses back below −DI. The exit deliberately does not wait on ADX — a fading ADX with price rolling over would otherwise strand the position.

Worked example. +DI climbs to 28 while −DI slips to 14 and ADX pushes through 25, so the strategy buys at 100. The trend runs to 118 before the lines converge and +DI drops under −DI, closing the trade for an 18% gain. A later stretch where +DI leads but ADX sits at 18 is skipped entirely — direction without strength is the chop this filter exists to avoid.

The Math Behind The Indicators

Everything runs on closing prices of the traded timeframe: P is a close, P_t today's close, and N counts bars — one bar is one candle of that timeframe, so 20 bars on a 1h chart is 20 hours.

Directional Movement (+DI, −DI, ADX)

Wilder's answer to two separate questions: which way is the market moving, and does the move deserve the name trend. Each bar is compared with the last — the part of today's high that pokes above yesterday's is up movement, the part of today's low that drops below yesterday's is down movement, and only the larger of the two counts. Smoothed over N bars and divided by the average true range, they become +DI and −DI. ADX then measures how far apart those two lines sit, so it rises in a strong move in either direction and falls to single digits when price is going nowhere. Because it reads the bar's high and low, it sees intrabar range that a close-only indicator cannot.

\[+\mathrm{DI} = 100 \dfrac{\mathrm{EMA}_N(+\mathrm{DM})}{\mathrm{ATR}_N}, \quad -\mathrm{DI} = 100 \dfrac{\mathrm{EMA}_N(-\mathrm{DM})}{\mathrm{ATR}_N}, \quad \mathrm{ADX} = 100 \cdot \mathrm{EMA}_N\!\left(\dfrac{\lvert +\mathrm{DI} - {-\mathrm{DI}} \rvert}{+\mathrm{DI} + {-\mathrm{DI}}}\right)\]

Example: If +DI is 30 and −DI is 10, buyers are clearly winning: the gap ratio is |30 − 10| / (30 + 10) = 0.5, so ADX is pulled toward 50 — a strong trend. When the two lines converge to 20 and 18 the ratio collapses to 0.05 and ADX sinks toward 5, marking a range where direction means little.

Example Chart

Real Data39/ 100Composite score

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Resampled Data41/ 100Composite score

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