What is ADX (Average Directional Index)?
In one line: ADX, the Average Directional Index, is a 0–100 line that measures how strong a trend is, whether it points up or down.
What it shows
ADX answers one question: is this market trending, and how strongly?
It doesn't say which way. A strong downtrend and a strong uptrend can both show a high ADX. It was built by J. Welles Wilder Jr. and usually looks back 14 candles.
Two helper lines come with it:
- +DI: the strength of recent up moves.
- −DI: the strength of recent down moves.
When +DI is above −DI, up moves have been stronger. When −DI is on top, down moves have been.
Rough guide to the numbers
| ADX | Common reading |
|---|---|
| Below 20 | Weak or no trend, often sideways |
| 20–25 | A trend may be forming |
| Above 25 | A trend is in place |
| Rising | The trend is getting stronger |
These are rules of thumb, not laws.
A simple example
A stock drifts sideways for two weeks. ADX sits at 15. Then it breaks higher and keeps making higher highs. Over the next 10 days, ADX climbs from 15 to 32, and +DI sits well above −DI.
The read: a real uptrend has formed and gained strength. The chart and ADX agree.
Why it matters
Many tools work in one kind of market and fail in the other. Trend tools like Parabolic SAR or moving-average crosses suit trends. Range ideas like Mean reversion suit sideways markets.
ADX helps you tell the two apart before picking a plan. More on spotting direction in how to identify a trend.
A common mistake
Reading a falling ADX as "the trend is reversing." A falling ADX means the trend is losing strength. Price may just go sideways for a while, then carry on.
ADX is a strength gauge, not a direction signal. Check the last turning points on the chart for direction.
Questions
What is a good ADX value?
Above 25 is commonly read as a trending market and below 20 as weak or sideways. Some traders use 20 as the line instead.
Is ADX a lagging indicator?
Yes. It's smoothed over 14 candles, so it confirms a trend after it starts rather than warning before.
Can ADX be used for crypto or forex?
Yes. It reads highs, lows and closes, so it works the same way on any chart.
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