Average Directional Index (ADX)

Measures trend strength on a 0-100 scale. Combine ADX with +DI and -DI to identify powerful trends and filter out choppy markets.

Trend
$56 $52 $48 $44 $40 Ranging Market Strong Uptrend ADX 75 50 25 0 25 BUY SELL Weak/No Trend Strong Trend ADX +DI -DI

Bullish Signals

  • +DI crosses above -DI while ADX is above 25, confirming a strong bullish trend
  • ADX rises from below 25 to above 25 with +DI already dominant, signaling trend ignition
  • ADX above 40 with +DI well above -DI indicates a powerful, sustained uptrend
  • After a pullback, +DI remains above -DI and ADX holds above 20

Bearish Signals

  • -DI crosses above +DI while ADX is above 25, confirming a strong bearish trend
  • ADX rises from below 25 to above 25 with -DI dominant, signaling bearish momentum
  • ADX above 40 with -DI well above +DI indicates aggressive selling pressure
  • After a bounce, -DI reclaims dominance over +DI with ADX still rising

What Is the ADX?

The Average Directional Index (ADX) was developed by J. Welles Wilder Jr. in 1978 and published in his book "New Concepts in Technical Trading Systems." It is a non-directional trend strength indicator, meaning it tells you how strong a trend is, not which direction it is going. The ADX oscillates between 0 and 100.

The ADX is always plotted alongside two companion lines: the Positive Directional Indicator (+DI) and the Negative Directional Indicator (-DI). While the ADX measures strength, +DI and -DI measure direction. When +DI is above -DI, upward movement is dominant. When -DI is above +DI, downward movement is dominant. The combination of ADX for strength and DI lines for direction creates a complete trend analysis system.

ADX readings are interpreted on a scale: 0-25 indicates a weak or absent trend (ranging market), 25-50 indicates a strong trend, 50-75 indicates a very strong trend, and 75-100 is an extremely powerful trend that is rare and often unsustainable. Most of the time, ADX stays in the 15-45 range.

How to Use the ADX

DI Crossover for Entry: The primary trading signal comes from DI crossovers. When +DI crosses above -DI, it is a bullish entry signal. When -DI crosses above +DI, it is a bearish entry signal. However, these crossovers only matter when the ADX confirms trend strength by reading above 25. DI crossovers in low-ADX environments are unreliable noise.

Trend Strength Filter: One of the most powerful uses of ADX is as a filter for other strategies. If you use moving average crossovers, RSI, or MACD for signals, you can require ADX above 25 before taking the trade. This single filter eliminates many losing trades that occur in choppy, trendless markets where most indicators generate false signals.

Identifying Market Regime: When ADX is below 25 and falling, the market is likely in a range. This is when mean-reversion strategies (like Bollinger Bounce or RSI overbought/oversold) tend to work best. When ADX is above 25 and rising, use trend-following strategies (moving average crossovers, breakouts, trailing stops). Matching your strategy to the market regime dramatically improves results.

ADX Divergence: When price makes a new high but ADX starts declining from above 25, the trend may be losing momentum even though price is still advancing. This divergence warns of a potential trend exhaustion and is useful for tightening stops or taking partial profits.

Common Mistakes

Assuming ADX shows direction: The most common error is treating a rising ADX as bullish. A rising ADX simply means the trend is strengthening, whether it is an uptrend or downtrend. Always check the DI lines for direction.

Trading DI crosses in weak trends: DI crossovers when ADX is below 20 are typically noise from a ranging market. These signals will whipsaw you repeatedly. Always require ADX above 25 before acting on a DI crossover.

Waiting for perfect readings: An ADX of 24.5 is functionally the same as 25. The 25 threshold is a guideline, not an exact boundary. Some traders use 20 as their threshold, which catches trends slightly earlier at the cost of slightly more false signals.

Ignoring falling ADX: A falling ADX does not mean the trend has reversed. It means the trend is weakening. Price can continue moving in the same direction while ADX falls. A falling ADX from 45 to 30 still indicates a trending market. Only when ADX falls below 25 is the trend considered weak.

Recommended Settings

Setting Period Threshold Best For
Standard 14 25 Swing trading, daily charts. The original Wilder setting.
Short-term 7 20 Day trading, intraday charts. Faster response, more whipsaws.
Long-term 21 25 Position trading, weekly charts. Smoother, filters more noise.

Frequently Asked Questions

The Average Directional Index (ADX) measures the strength of a trend regardless of its direction. It ranges from 0 to 100, with readings above 25 indicating a strong trend and below 25 indicating a weak or non-trending market. The ADX is used alongside +DI and -DI lines which indicate trend direction.
An ADX reading of 25 is the commonly accepted threshold separating trending from non-trending markets. Below 25, the market is considered range-bound or choppy. Above 25, a meaningful trend is present. Readings above 50 indicate a very strong trend, while above 75 is extremely rare and signals powerful momentum.
When +DI crosses above -DI, it signals bullish momentum as upward price movement is dominating. When -DI crosses above +DI, it signals bearish momentum. These crossovers are most reliable when the ADX is above 25, confirming that the trend has real strength behind it. Crossovers with ADX below 20 are typically noise.
No, the ADX line itself only measures trend strength, not direction. A rising ADX means the trend is getting stronger whether price is going up or down. To determine direction, you must look at the +DI and -DI lines: +DI above -DI means bullish, -DI above +DI means bearish.
The standard 14-period ADX works well for most timeframes including intraday. Day traders sometimes use a shorter 7-period ADX for faster signals, though this increases noise and false crossovers. Swing traders may prefer a 21-period ADX for smoother readings. The 25-level threshold remains useful across all settings.

Related Indicators

Moving Averages

SMA and EMA provide trend direction signals that ADX can filter for strength and reliability.

Parabolic SAR

Trailing stop-and-reverse dots that work best in trending markets confirmed by ADX above 25.

MACD

Momentum crossover indicator that pairs naturally with ADX for high-confidence trend entries.

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