This is the Average Directional Movement Index calculated using the correct formula from the book "New Concepts in Technical Trading Systems" by Welles Wilder. The indicator that comes with MT4 uses a different formulas that gives a different result.

Parameters

• DMILength: Periods for calculating the Average Directional Movement Index.
• ShowADX: Set to "True" to show the ADX line on the indicator.
• ShowADXR: Set to "True" to show the ADXR line on the indicator.

To fully understand how this indicator works I highly recommend reading the book "New Concepts in Technical Trading Systems" by Welles Wilder.