Average Directional Index Rating (14)

The Average Directional Index Rating (14) is a trend indicators indicator used in Skyrexio Strategy Builder for trend strength measurement and direction identification.

Introduction

The Average Directional Index Rating (14) is a neutral trend strength indicator that provides smoother, more stable trend measurements than the standard ADX. This indicator is designed for long-term trend analysis and reduced whipsaws in volatile markets, making it ideal for swing trading and position trading strategies.

How Average Directional Index Rating (14) Works

The Average Directional Index Rating (ADXR) was developed by J. Welles Wilder Jr. as a smoothed version of ADX to reduce volatility and provide more stable trend strength readings. The calculation averages the current ADX with the ADX from n periods ago: ADXR = (Current ADX + ADX from n periods ago) / 2.

ADXR characteristics: • Smoother readings than ADX, reducing false signals in volatile markets • Stable trend measurement - better for identifying sustained trend strength • Reduced whipsaws - filters out short-term ADX fluctuations • Confirmation tool - validates ADX signals and trend persistence

Market Psychology: ADXR represents the "sustained conviction" behind market movements. While ADX can spike temporarily, ADXR shows whether trend strength is genuinely persistent or just a brief surge. This makes it invaluable for identifying trends worth following versus temporary momentum bursts.

Key Characteristics

Attribute	Details
Category	Trend Indicators
Type	Neutral Trend Strength Indicator
Primary Use	Long-term trend analysis and stable trend measurement
Timeframe	All timeframes supported (1m to 1M)
Confirmation	ADX comparison, directional indicators, volume

Strategy Applications

🟢 LONG STRATEGY (Context-Dependent)

Use ADXR for LONG strategies when ADXR > 25 confirms sustained trending conditions AND +DI > -DI confirms bullish direction.

Base Entry Order (LONG)

Trigger Type: Once per bar close
Bar TF: 4H

First Condition: Average Directional Index Rating (14)
Timeframe: 4H
Operator: Greater Than
Second Condition: Value
Value: 25

AND

First Condition: Plus Directional Indicator (14)
Timeframe: 4H
Operator: Greater Than
Second Condition: Minus Directional Indicator (14)
Timeframe: 4H

Additional Entry Orders (LONG)

Additional Entry 1: Sustained trend strength confirmation
First Condition: Average Directional Index Rating (14)
Timeframe: 4H
Operator: Greater Than
Second Condition: Average Directional Index (14)
Timeframe: 4H

AND

First Condition: Volume
Timeframe: 4H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 4H

OR

Additional Entry 2: Higher timeframe alignment
First Condition: Average Directional Index Rating (14)
Timeframe: 1D
Operator: Greater Than
Second Condition: Value
Value: 30

AND

First Condition: Close Price
Timeframe: 4H
Operator: Greater Than
Second Condition: Exponential Moving Average (50)
Timeframe: 4H

Take Profit Orders (LONG)

Rule 1: Exit condition - Sustained trend weakness
First Condition: Average Directional Index Rating (14)
Timeframe: 4H
Operator: Less Than
Second Condition: Value
Value: 20

OR

Rule 2: Exit condition - Directional momentum shift
First Condition: Minus Directional Indicator (14)
Timeframe: 4H
Operator: Greater Than
Second Condition: Plus Directional Indicator (14)
Timeframe: 4H

OR

Rule 3: Exit condition - Long-term momentum exhaustion
First Condition: RSI
Timeframe: 1D
Operator: Greater Than
Second Condition: Value
Value: 70

Stop Loss Orders (LONG)

Rule 1: Stop loss - Sustained trend failure
First Condition: Average Directional Index Rating (14)
Timeframe: 4H
Operator: Less Than
Second Condition: Value
Value: 16

OR

Rule 2: Stop loss - Stable bearish shift confirmed
First Condition: Minus Directional Indicator (14)
Timeframe: 4H
Operator: Cross Above
Second Condition: Plus Directional Indicator (14)
Timeframe: 4H

OR

Rule 3: Stop loss - Volume pattern breakdown
First Condition: Volume
Timeframe: 4H
Operator: Less Than
Second Condition: Simple Moving Average (50)
Timeframe: 4H

🔴 SHORT STRATEGY (Context-Dependent)

Use ADXR for SHORT strategies when ADXR > 25 confirms sustained trending conditions AND -DI > +DI confirms bearish direction.

Base Entry Order (SHORT)

Trigger Type: Once per bar close
Bar TF: 4H

First Condition: Average Directional Index Rating (14)
Timeframe: 4H
Operator: Greater Than
Second Condition: Value
Value: 25

AND

First Condition: Minus Directional Indicator (14)
Timeframe: 4H
Operator: Greater Than
Second Condition: Plus Directional Indicator (14)
Timeframe: 4H

Additional Entry Orders (SHORT)

Additional Entry 1: Persistent bearish strength
First Condition: Average Directional Index Rating (14)
Timeframe: 4H
Operator: Greater Than
Second Condition: Average Directional Index (14)
Timeframe: 4H

AND

First Condition: Volume
Timeframe: 4H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 4H

OR

Additional Entry 2: Multi-timeframe bearish alignment
First Condition: Average Directional Index Rating (14)
Timeframe: 1D
Operator: Greater Than
Second Condition: Value
Value: 30

AND

First Condition: Close Price
Timeframe: 4H
Operator: Less Than
Second Condition: Exponential Moving Average (50)
Timeframe: 4H

Take Profit Orders (SHORT)

Rule 1: Exit condition - Sustained bearish weakness
First Condition: Average Directional Index Rating (14)
Timeframe: 4H
Operator: Less Than
Second Condition: Value
Value: 20

OR

Rule 2: Exit condition - Directional momentum reversal
First Condition: Plus Directional Indicator (14)
Timeframe: 4H
Operator: Greater Than
Second Condition: Minus Directional Indicator (14)
Timeframe: 4H

OR

Rule 3: Exit condition - Oversold bounce potential
First Condition: RSI
Timeframe: 1D
Operator: Less Than
Second Condition: Value
Value: 30

Stop Loss Orders (SHORT)

Rule 1: Stop loss - Sustained trend reversal
First Condition: Average Directional Index Rating (14)
Timeframe: 4H
Operator: Less Than
Second Condition: Value
Value: 16

OR

Rule 2: Stop loss - Stable bullish shift confirmed
First Condition: Plus Directional Indicator (14)
Timeframe: 4H
Operator: Cross Above
Second Condition: Minus Directional Indicator (14)
Timeframe: 4H

OR

Rule 3: Stop loss - Volume surge against position
First Condition: Volume
Timeframe: 4H
Operator: Greater Than
Second Condition: Simple Moving Average (100)
Timeframe: 4H

Advanced Strategy Combinations

ADXR vs ADX Comparison Strategy

Setup

Stability Confirmation:

• ADXR > ADX: Trend strength is building and sustainable

• ADXR < ADX: Current trend strength may be temporary

• ADXR = ADX: Stable trend strength conditions

Execution

Long-Term Position Trading Framework

ADXR Position Trading Setup:

Daily ADXR > 30: Strong long-term trend

• Use for major position entries

• Hold for extended periods

• Wider stop losses acceptable

4H ADXR 25-30: Moderate trend strength

• Standard position sizing

• Regular monitoring required

• Medium-term holds

ADXR < 25: Weak trend strength

• Avoid new positions

• Consider exits from existing positions

• Focus on range-trading approaches

Execution Framework:

• Base Order: Higher timeframe ADXR confirmation

• Additional: Lower timeframe ADXR alignment

• Take Profit: ADXR trend strength deterioration

• Stop Loss: ADXR failure or directional shift

Risk Management Guidelines

Position Sizing Based on ADXR

ADXR Level	Position Size	Hold Period	Risk Level
ADXR > 35	Full size	Long-term	Low
ADXR 25-35	Standard size	Medium-term	Medium
ADXR 20-25	Reduced size	Short-term	Medium-High
ADXR < 20	Minimal/Avoid	N/A	High

ADXR Reliability Factors

High Reliability

✅ ADXR > ADX (building strength) ✅ Multi-timeframe ADXR alignment ✅ Sustained ADXR levels over time ✅ Clear directional bias with +DI/-DI

Low Reliability

Best Practices

For Long-Term Strategies

1. Higher timeframes - Use 4H, Daily, or Weekly for ADXR analysis

2. Patience required - ADXR signals develop slowly but are more reliable

3. Sustained levels - Look for ADXR staying above 25 for multiple periods

4. Volume confirmation - Ensure volume supports the trend strength

For Swing Trading

1. ADXR > ADX preferred - Confirms trend strength is building

2. Multi-timeframe - Verify ADXR alignment across timeframes

3. Directional clarity - Always confirm with +DI/-DI comparison

4. Wider stops - Use larger stop losses due to longer-term nature

Common Mistakes to Avoid

• Impatience - ADXR moves slowly; don't expect quick signals

• Ignoring ADX - Compare ADXR to ADX for context

• Wrong timeframe - ADXR works best on higher timeframes

• No direction - ADXR doesn't show trend direction, only strength

Market Conditions Analysis

Market Type	ADXR Effectiveness	Recommended Approach
Sustained Uptrend	🟢 High (ADXR > 30)	LONG position trading
Sustained Downtrend	🟢 High (ADXR > 30)	SHORT position trading
Choppy Markets	🟡 Medium (ADXR 20-25)	Reduced positions
Ranging Markets	🔴 Low (ADXR < 20)	Avoid trend strategies
Volatile Markets	🟢 High	ADXR filters noise better than ADX

Related Indicators

Indicator	Relationship	Link
Average Directional Index (ADX)	Base indicator for ADXR	ADX
Directional Index (DX)	Raw calculation basis	DX
Plus Directional Indicator (+DI)	Bullish direction	+DI
Minus Directional Indicator (-DI)	Bearish direction	Minus DI

Conclusion

Average Directional Index Rating (14) is primarily a long-term trend strength indicator that provides more stable and reliable readings than ADX. Its main value lies in identifying sustained trends worth following for extended periods.

Key Takeaways

• PRIMARY USE: Long-term trend strength analysis and position trading

• SECONDARY USE: Swing trading with sustained trend confirmation

• STABILITY FOCUS: Smoother readings reduce false signals

• ALWAYS: Compare with ADX and confirm direction with +DI/-DI

Success with ADXR requires patience and understanding that it's designed for longer-term analysis. Use it to identify trends worth holding for extended periods, and combine with directional indicators for precise entry and exit timing.

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