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💪 Trend indicator

Average Directional Index (ADX): How to Read It

The Average Directional Index measures how strong a trend is, regardless of its direction. Paired with the +DI and -DI lines, it also helps identify which side is in control.

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The formula

+DM = High - PrevHigh if greater than PrevLow - Low and positive, else 0 -DM = PrevLow - Low if greater than High - PrevHigh and positive, else 0 +DI = 100 * Wilder(+DM, N) / ATR(N) -DI = 100 * Wilder(-DM, N) / ATR(N) DX = 100 * |+DI - -DI| / (+DI + -DI) ADX = Wilder average of DX over N

Common settings: 14 periods; trend threshold around 20 to 25

How to read it

  • ADX below 20 suggests a weak or absent trend.
  • ADX above 25 suggests a trending market.
  • Rising ADX means the trend is strengthening.
  • Falling ADX means the trend is weakening, even if price still moves.
  • +DI above -DI suggests bullish pressure; the reverse suggests bearish pressure.

Typical signals

  • ADX rising above 25 with +DI above -DI as a strong uptrend filter.
  • ADX rising above 25 with -DI above +DI as a strong downtrend filter.
  • +DI crossing -DI as a potential direction change.
  • ADX turning down from a high level as trend exhaustion.

Pitfalls to avoid

  • ADX itself does not show direction.
  • It lags because it is double smoothed.
  • High ADX can stay high even as a trend nears its end.

Strategies that use it

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FAQ

Does a high ADX mean price is rising?

No. ADX measures trend strength, which can be up or down.

What ADX level means a trend?

Many traders use 20 or 25 as the threshold for a meaningful trend.

How do I use ADX as a filter?

Use trend strategies only when ADX is high, and range strategies when it is low.

Educational only – not financial advice. This page explains ideas and reports the news. It is not a recommendation to buy, sell or hold anything. Markets go up and down and you can lose money. Do your own research and consider talking to a licensed adviser.

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