The purpose of the Average Directional Index (ADX) is to measure the strength and direction of a market trend. Developed by J. Welles Wilder, the ADX is a widely used technical indicator in trading and investing. It helps traders and investors identify whether a market is trending or ranging and assess the strength of the trend.

The ADX is calculated based on the relationship between positive directional movement (+DM), negative directional movement (-DM), and true range (TR) over a specified period. The resulting value is presented on a scale from 0 to 100.

A high ADX value indicates a strong trend, whether it's an uptrend or a downtrend, while a low ADX value suggests a weak or non-existent trend. Traders can use the ADX to filter out noisy or choppy markets and focus on those with significant trending potential.

By understanding the trend strength, traders can adjust their strategies accordingly. For trend-following traders, a high ADX value can provide confidence to enter or stay in trades, while range-bound traders may prefer to wait for higher ADX values or seek other trading opportunities.

Overall, the purpose of the Average Directional Index is to help traders gauge trend strength and make informed decisions about market participation and trade management.

The Average Directional Index (ADX) is a technical indicator used to measure the strength of a trend in a financial market, regardless of its direction. Developed by J. Welles Wilder, ADX helps traders identify whether a market is trending or range-bound, aiding in decision-making.

The ADX scale ranges from 0 to 100, where values below 20 indicate weak trends or consolidation, while values above 25 suggest strong trends. It does not indicate the trend's direction but works alongside two directional movement indicators (DMI+ and DMI-) to determine bullish or bearish trends.

By analyzing ADX, traders can decide when to follow trend-based strategies or avoid them during weak trends, improving timing and risk management in trading decisions.