Directional system was developed by J. Wilder in the middle of 1970s as an addition to the system PARABOLIC SAR, and then it was advanced by a number of the analysts. ADX defines the tendency and shows, whether it moves quickly enough to follow it. ADX helps to take benefit, being still in the middle of important trends.
There are three lines in the indicator graph, a trend following line, a positive directional line (+DI) and a negative directional line (-DI). The Blue line tracks trends, the green line (+DI) is a signal to go long and the red line (-DI) is a signal line to go short. What we do is to wait for the blue line (trend line) to rise from below 20 to above 20. That means a trend is being developed.
Then we watch for other lines. When the green line (+DI) crosses above the red line (-DI), it is a signal to go long. And vise versa, when the red line (-DI) crosses above the green line (+DI), it is a signal to go short.