• : March 28, 2021
  • : Prashant Shah


Relative Strength Index or RSI and Average Directional Index or ADX are popular indicators invented by J. Welles Wilder.

I have explained their nature and calculation in the indicator blog section: RSI and ADX.

Both indicators use the Wilder averaging method for calculation. 14-period is the default setting for both the indicators.

RSI is a momentum indicator. It will be bullish if average closing price is higher in last 14-period. Traders also plot 9-period average line on RSI line to identify crossovers.

There are three lines in the ADX indicator: DMI+, DMI- and ADX. DMI+ is a bullish line, DMI-is a bearish line and ADX shows strength of trend based on behavior of the DMI lines. DMI+ and DMI- lines are calculated using high and low prices. Trend is divided by ATR (Volatility) to calculate DMI lines.

Key difference between both the indicators is that ADX is calculated on high-low prices and it also considers volatility. It also shows strength of the trend using ADX line.

How about using the key attributes of the indicators and create a new one?

The three lines forming part of the ADX and the use of volatility in the calculation is the key aspect of ADX indicator. The DMI line calculation gives opportunity to divide RSI line in two. We can use RSI line calculations based on closing price of DMI lines.

That will make DMI lines bit smoother, and ADX line will be calculated based on RSI calculation.

Let us call this fusion as RDX which is nothing but the combination of RSI and ADX. There will be three lines in the RDX indicator: RMI+, RMI- and RDX.

RM+ is DMI+ line calculated using RSI formula. RMI- is DMI- line calculated using RSI formula. RDX is ADX line calculated on RMI+ and RMI-.

Calculation based on closing price might makes the curve a bit smoother. The reading of RDX is like ADX. But I feel RMI crossovers would be more useful. Positive crossover happens when the bulls gain strength in RSI. Negative crossover is bears gaining strength. RDX will show the strength of the trend.

There could be many possibilities from a trading perspective but the system that I recommend using RDX indicator would be:

  • Bullish: RMI+ crossing RMI- upwards and RDX is rising
  • Bearish: RMI+ crossing RMI- downwards and RDX is rising

The indicator is like ADX itself. RDX is just an attempt to explore different possibilities. Try it in different charting methods to see if you find it useful.

The change in the formula is logically particularly useful in Noiseless charts. Bullish patterns when RDX setup is bullish and bearish patterns when RDX setup is bearish can prove useful.