Trend strength

ADXAverage Directional Index

Q: What does ADX above 25 mean?

A strong trend — in either direction. ADX is direction-agnostic. To know which way, look at whether +DI is above -DI (uptrend) or below (downtrend).

Q: When should I trade range-bound strategies?

When ADX is below 20. Mean-reversion strategies (buying support, selling resistance, fading Bollinger band touches) perform best in clear ranges with low ADX.

Q: Can I use ADX to find entries?

Not for direction. ADX tells you the regime (trend vs range), which determines which type of entry strategy to use. The directional indicator (+DI / -DI) gives you the trend direction, but they are slow signals — not for fine-tuning entries.

Q: What is the default ADX setting?

14-period lookback with Wilder smoothing. This is the original from Wilder's 1978 publication and remains the standard.

Q: What is the difference between ADX and ATR?

Both are direction-agnostic and both come from Wilder. ATR measures volatility (how big bars are). ADX measures trend strength (how directional the moves are). They are complementary — use ADX to classify the regime, ATR to size stops and positions.

ADX measures trend strength, not direction. Above 25 = strong trend (any direction). Below 20 = ranging market. Critical for switching between trend-following and mean-reversion strategies.

14 candles

Default period

0 to 100

Range

Strong trend > 25 / Range < 20

Signal levels

Regime classification (trend vs range)

Best use

What is ADX?

ADX was introduced by Wilder in 1978, the same publication that introduced RSI and ATR. It plots a single line on a 0-100 scale derived from the +DI (positive directional indicator) and -DI (negative directional indicator). The ADX line itself is direction-agnostic — it tells you only how strong the trend is, not which way.

Readings above 25 indicate a strong trend (any direction). Below 20, the market is in a range. The 20-25 zone is transitional. ADX is the single most useful indicator for regime classification.

Category: Trend strength
Default settings: 14 candles
Signal range: 0 to 100
Introduced by: J. Welles Wilder Jr., 1978

How ADX works

Three lines are typically plotted:

+DI = directional indicator measuring upside momentum -DI = directional indicator measuring downside momentum ADX = smoothed average of the absolute difference between +DI and -DI

When +DI is above -DI, the trend is up. When -DI is above +DI, the trend is down. ADX itself measures the magnitude of the divergence: large gaps between +DI and -DI produce high ADX (strong trend); small gaps produce low ADX (range).

ADX is calculated using Wilder's smoothing, which reduces noise but adds lag. The 14-period default is standard.

How to use ADX

Two essential uses.

1. Strategy regime filter: Only trade trend-following setups (MACD crossovers, EMA pullbacks) when ADX is above 25. Only trade mean-reversion setups (Bollinger band touches, Stochastic divergence) when ADX is below 20. This single filter eliminates the most common 'wrong strategy at the wrong time' losses.

2. Rising vs falling ADX: Rising ADX confirms an accelerating trend. Falling ADX from a peak signals trend exhaustion (regardless of direction). A 4H ADX falling from 40+ often precedes consolidation or reversal.

Avoid using ADX as a directional signal. It is not designed for that. Use +DI and -DI crossovers (also direction-agnostic except for which DI is higher) for context, never as primary entry signals.

Want more practical context? Look up unfamiliar terms in the forex glossary, or see how indicators stack on real charts in the trading blog.

ADX FAQ

What does ADX above 25 mean?

A strong trend — in either direction. ADX is direction-agnostic. To know which way, look at whether +DI is above -DI (uptrend) or below (downtrend).

When should I trade range-bound strategies?

When ADX is below 20. Mean-reversion strategies (buying support, selling resistance, fading Bollinger band touches) perform best in clear ranges with low ADX.

Can I use ADX to find entries?

Not for direction. ADX tells you the regime (trend vs range), which determines which type of entry strategy to use. The directional indicator (+DI / -DI) gives you the trend direction, but they are slow signals — not for fine-tuning entries.

What is the default ADX setting?

14-period lookback with Wilder smoothing. This is the original from Wilder's 1978 publication and remains the standard.

What is the difference between ADX and ATR?

Both are direction-agnostic and both come from Wilder. ATR measures volatility (how big bars are). ADX measures trend strength (how directional the moves are). They are complementary — use ADX to classify the regime, ATR to size stops and positions.

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