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ADXR index rating

The Average Directional Movement Index Rating (ADXR) uses the ADX bar value and calculates the average sum of it and the ADX value of a recent trailing bar. As a result, the ADX values smooth. As with the ADX, a rising ADXR can indicate a strong basic trend. A falling ADXR in its turn can suggest a weakening trend subject to a reversal. Often ADXR can also indicate non-trending markets or the worsening of a current trend. Still the ADXR is not a directional indicator even though Forex market direction is significant in its calculation.

The ADXR is different from ADX because it does not heavily depend on short and quick reversals as it results in a formula that is smoother. It is supposed to make up the big variety of excessive tops and bottoms and is mostly useful when used together with trend-following strategies. People who rely on strategies, which are based on the notion that inconstancy is a sign of movement, may not realize that movement does not always indicate inconstancy. ADXR gives information belonging to the trend strength. It helps one to minimize the risk of trading in unsteady markets fluctuating between non-trending and trending./

ADXR measures the strength of a prevailing trend and defines if there is direction in a market. As a rule, a reading above 25 is thought to be directional (it is plotted from zero and over). ADX defines the market tendencies and indicates if it changes quickly enough to reach it. ADX helps to get profit staying in the center of significant trends.

This indicator encourages looking for tendency force. If ADX goes up, it means that the market tendency is getting stronger. Then you should stop the bargains only in the direction of the tendency. If ADX goes down, the tendency is rather doubtful. In this case signs submitted by such oscillators as RSI and Momentum become quite significant.

The directional analysis usually follows movements in people's mood - both optimistic and pessimistic, measuring the possibility of the bulls and bears to move the prices under the boundaries of a price range of the preceding day. If the today's lowest price is lower than the yesterday's smallest one, the market is likely to go to pessimism and, vice versa, if the today's best price is higher than yesterday's one, the market can get more optimistic.

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