The ADXR is used in conjunction with the D+/D-. The difference between today's high and yesterday's high is the up movement or D+, the difference between today's low and yesterday's low is the down directional movement or D-. The D+/D- is the difference between the moving averages of the two. The ADXR is calculated by dividing the difference between D+ and D- by their sum and multiplying by 100 then smoothing with an exponential moving average. You choose the term of the moving average.

The ADXR is a measure of the spread between the D+ and D-. As the spread decreases, the ADXR declines, signalling market turmoil and the inadvisability of using trend-following trading strategies. However, a rising ADXR signals that the dominant trend is likely to continue.

A rising ADXR, with both the ADXR and D+ above the D- indicates a strengthening bullish market.

A rising ADXR, with both the ADXR and D- above D+ indicates a strengthening bearish trend.

If the ADXR has been below both D+ and D- but has begun to rise a new market trend is emerging.

References

Elder, Dr A. (1993). Trading for a Living. Wiley.