Indicators
ADX (Average Directional Index)
3 min
The ADX (Average Directional Index) answers one specific question that most indicators ignore: is there a trend at all, and how strong is it? It measures trend strength, not direction.
How to read it
ADX runs from 0 to 100:
- Below 20–25 — weak or no trend; the market is ranging. Trend-following tools will whipsaw here.
- Above 25 — a trend is present and worth following.
- Rising ADX — the trend is strengthening; falling ADX — it is weakening, regardless of which way price is going.
The directional companions
ADX is usually plotted with +DI and −DI lines. +DI above −DI means buyers dominate; −DI above +DI means sellers dominate. ADX itself measures the strength of whichever side leads; the DI lines tell you the side.
The key insight and limitation
ADX is the perfect filter: use it to decide which kind of strategy fits the moment — trend-following when ADX is high, range/mean-reversion when it is low. Its weakness is that it is lagging and non-directional: a high ADX confirms a strong trend that is already well underway, and a falling ADX from a high level does not tell you whether price will reverse or merely pause.
This content is for educational and informational purposes only and is not investment, financial, tax or legal advice. Trading and investing carry risk, including the possible loss of capital. Any performance shown by third-party tools is hypothetical and not a promise of future results. Do your own research and consider professional advice before making any decision.