Average Directional Index
A trend-strength indicator that measures how strong the current trend is.
The ADX measures trend strength on a scale from 0 to 100 — but it doesn't tell you direction. An ADX above 25 generally indicates a strong trend. Below 20 suggests a ranging market. It comes with two companion lines (+DI and -DI) that indicate trend direction.
Why It Matters
Knowing whether the market is trending or ranging changes everything about which strategies work. Trend-following strategies thrive when ADX is high. Mean-reversion strategies work better when ADX is low. ADX helps you pick the right approach for current conditions.
Settings Explained
Direction — Bullish, bearish, or both.
Period — Calculation period. Standard is 14.
Threshold — The ADX level that defines a 'strong trend.' Common threshold: 25. Above this, the market is considered trending.
Look Back Mode — How far back to calculate.
Outputs
- ADX — The trend strength value (0-100). Direction-neutral
- +DI — Positive directional indicator. When +DI > -DI, bulls are in control
- -DI — Negative directional indicator. When -DI > +DI, bears are in control
Example Use Case
You add ADX as a trend filter. Your strategy only takes trend-following trades when ADX is above 25 (confirming a strong trend) and +DI is above -DI (confirming bullish direction). This prevents your trend strategy from trading in choppy, ranging conditions.
ADX is one of the best 'meta-indicators' — use it to decide which strategy to run rather than as a direct entry signal. High ADX = trend strategy. Low ADX = mean-reversion strategy.