ADX (Average Directional Index) is a trend strength indicator that measures how strong a trend is, regardless of direction. Created by Welles Wilder, ADX ranges from 0 to 100—higher values indicate stronger trends. ADX doesn’t tell you if the trend is up or down; it only tells you how strong it is. The companion indicators +DI and -DI show trend direction.
- Measures trend strength from 0-100
- Below 20 = no trend; Above 40 = strong trend
- Use +DI and -DI for trend direction
How ADX Works
ADX measures trend strength through directional movement:
ADX Components:
+DI (Plus Directional Indicator)
= Measures upward price movement
-DI (Minus Directional Indicator)
= Measures downward price movement
ADX
= Smoothed average of |+DI - -DI| / (+DI + -DI)
= Shows trend strength (0-100)
Interpretation:
ADX 0-20: Weak or absent trend (range)
ADX 20-40: Trend developing
ADX 40-60: Strong trend
ADX 60+: Very strong trend (rare)
Quick Reference: ADX Levels
| ADX Value | Trend Strength | Trading Approach |
|---|---|---|
| 0-20 | No trend | Range trading |
| 20-25 | Trend emerging | Watch for breakout |
| 25-40 | Trending | Trend-following |
| 40-60 | Strong trend | Stay with trend |
| 60+ | Extremely strong | Exhaustion possible |
Example: Using ADX
ADX Filter for Trend Trading:
| Day | Price | ADX | +DI/-DI | Analysis |
|---|---|---|---|---|
| 1 | $100 | 15 | +DI > -DI | No trend yet |
| 5 | $105 | 22 | +DI > -DI | Trend emerging |
| 10 | $115 | 35 | +DI > -DI | Uptrend confirmed, BUY |
| 20 | $130 | 45 | +DI > -DI | Strong trend, hold |
| 30 | $140 | 30 | +DI > -DI | Trend weakening |
ADX measures trend strength from 0 to 100—not direction. Below 20 means no trend; use range strategies. Above 25-40 means trending; use trend strategies. +DI above -DI means uptrend; -DI above +DI means downtrend.
ADX Trading Strategies
ADX Filter
Only take trend trades when ADX is above 20-25. Avoid when ADX is below 20.
DI Crossover
Buy when +DI crosses above -DI with ADX rising. Sell when -DI crosses above +DI.
ADX Breakout
ADX rising from below 20 to above 20 signals trend beginning. Enter in direction of DI.
Trend Exhaustion
Very high ADX (above 50) may indicate trend exhaustion. Watch for reversal signs.
ADX Components
+DI (Plus Directional Indicator)
Measures bullish pressure. When +DI is above -DI, bulls are winning.
-DI (Minus Directional Indicator)
Measures bearish pressure. When -DI is above +DI, bears are winning.
ADX Line
The trend strength line. Rising ADX means trend strengthening. Falling ADX means trend weakening.
ADX vs Other Indicators
| Purpose | Use ADX |
|---|---|
| Trend strength | Yes |
| Trend direction | Use +DI/-DI |
| Overbought/Oversold | Use RSI |
| Entry timing | Use price action |
Common Mistakes
-
Using ADX for direction – ADX only shows strength. Use +DI/-DI for direction.
-
Trading when ADX is low – Below 20 means no trend. Don’t use trend strategies.
-
Ignoring ADX slope – Rising ADX is more important than absolute value.
-
Over-reliance – ADX lags. Combine with price action for timing.
How JournalPlus Tracks ADX
JournalPlus logs ADX levels at entry, helping you analyze whether trend strength filtering improves your trading results.
