ADX explained: how strong is this trend, really?
ADX answers a different question from most indicators. Not "up or down?" but "is there a trend at all?" That makes it a useful filter, as long as you know what it can't say.
What ADX measures
ADX stands for average directional index. J. Welles Wilder introduced it in 1978.
It measures trend strength, on a scale from 0 to 100.
- Low ADX: price is drifting, with no clear push either way.
- High ADX: price is moving strongly in one direction.
The key point: ADX has no direction. A strong downtrend and a strong uptrend can both have a high ADX.
The three lines
The full indicator usually shows three lines:
- +DI (plus directional indicator): how strong the upward pushes have been.
- −DI (minus directional indicator): how strong the downward pushes have been.
- ADX: a smoothed measure of how far apart +DI and −DI are.
If +DI is well above −DI, the up pushes have been winning. If −DI is above +DI, the down pushes have been winning. ADX then says how one-sided that has been.
How it's built (the plain version)
You don't need to do this by hand. But knowing the steps removes the mystery.
- Each candle, compare today's high with yesterday's high (the up push) and today's low with yesterday's low (the down push). Only the bigger one counts.
- Smooth those pushes over 14 candles and divide by the average true range (ATR). That gives +DI and −DI.
- Work out how far apart they are: the gap between them divided by their total, times 100. That's called DX.
- Smooth DX over 14 candles. That's ADX.
A quick example of step 3: +DI is 30 and −DI is 10.
- Gap: 30 − 10 = 20
- Total: 30 + 10 = 40
- 20 ÷ 40 × 100 = 50
A DX of 50 means one side has been clearly stronger. ADX smooths numbers like that over time.
Reading the numbers
The common default is 14. Many traders use rough bands like these:
| ADX reading | Common reading |
|---|---|
| Below 20 | Weak or no trend. Often sideways. |
| 20 to 25 | A trend may be forming. Unclear. |
| Above 25 | Often called trending. |
| Above 40 | A strong trend. Can also mean a move is stretched. |
These are rules of thumb, not laws. Different markets and timeframes behave differently.
The slope matters too
- Rising ADX: the trend is getting stronger (in whichever direction it's going).
- Falling ADX: the trend is losing strength. Price might go sideways, or slowly turn.
A falling ADX from a high level doesn't mean the trend reversed. It often just means price is pausing.
ADX tells you how hard the wind is blowing. It doesn't tell you which way.
How traders use ADX
- Choosing the right playbook. ADX above 25: trend tools and pullback ideas fit better. ADX below 20: range ideas fit better. See trend following and range trading.
- Filtering out chop. Some traders skip trend setups when ADX is under 20, because those setups often fail in sideways markets.
- DI crossovers. +DI crossing above −DI is read as up pushes taking over. These crosses happen a lot in quiet markets and are noisy.
What ADX can't do
- It doesn't show direction. Always check the price chart or the DI lines.
- It lags a lot. Two layers of 14-candle smoothing make it slow. By the time ADX reads 25, the trend may be well under way.
- It can't time entries. It's a weather report, not a starting gun.
Where it fits with our method
We read direction from the chart's turning points: higher highs and higher lows for up, lower highs and lower lows for down. See how to identify a trend.
ADX can answer the next question: is this trend strong, or is price mostly drifting?
- Turning points say up, ADX above 25 and rising: the chart and the indicator agree.
- Turning points are messy, ADX below 20: probably a range. Range rules, or no trade.
The entry rule stays the same. A candle body closing past a marked level counts. The Stop loss goes past the last turning point. Size comes from the position size calculator.
Common mistakes
- Reading high ADX as bullish. A crash can have a very high ADX.
- Entering just because ADX crossed 25. That's late and says nothing about direction.
- Shorting because ADX turned down. A falling ADX often means a pause, not a reversal.
- Trusting it on tiny timeframes alone. On a 1-minute chart, ADX swings with every burst of noise.
Try it today on TradingView
About 10 minutes.
- Open a daily chart. Add "Average Directional Index" or "Directional Movement" from Indicators (length 14).
- Find a clear uptrend and a clear downtrend. Write down the ADX reading in each.
- Find a sideways stretch. What was ADX there?
- Mark the turning points on each stretch. Did ADX agree with what the turning points showed?
- Log the three readings in your trading journal.
Look at the downtrend reading on purpose. Seeing a high ADX in a falling market is the fastest way to remember it has no direction.
Questions
What is a good ADX value?
Many traders call a reading above 25 trending and below 20 weak or sideways. Those are rough guides. Check how your market behaves at those levels.
Does ADX show trend direction?
No. ADX only measures strength. Use the +DI and −DI lines, or better, the chart's turning points, to see direction.
What does a falling ADX mean?
The trend is losing strength. Price may pause, go sideways or turn. It isn't a reversal signal on its own.
What is the default ADX setting?
14 periods, from Wilder's original work. Most charting apps use 14 for both the DI lines and the ADX smoothing.
Is ADX a leading or lagging indicator?
Lagging. It's smoothed twice from past prices, so it reacts slowly. It's best used to describe the market, not to time entries.
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