is used to quantify trend strength. calculations are based on a moving average of price range expansion over a given period of time. The default setting is 14 bars, although other time periods can be used. can be used on any trading vehicle such as stocks, mutual funds, exchange-traded funds and .
is plotted as a single line with values ranging from a low of zero to a high of 100. is non-directional; it registers trend strength whether price is trending up or down. The indicator is usually plotted in the same window as the two indicator (DMI) lines, from which is derived.
When the is above the , prices are moving up, and measures the strength of the uptrend. When the is above the , prices are moving down, and measures the strength of the downtrend.
values help traders identify the strongest and most profitable trends to trade. The values are also important for distinguishing between trending and non-trending conditions. Many traders will use readings above 25 to suggest that the trend is strong enough for trend-trading strategies. Conversely, when is below 25, many will avoid trend-trading strategies.
Value Trend Strength
0-25 Absent or Weak Trend
25-50 Strong Trend
50-75 Very Strong Trend
75-100 Extremely Strong Trend