What Is the ADX Indicator?
ADX, the average directional index, measures the strength of a trend on a scale from 0 upward, with 25 the conventional threshold for a trend being present. It contains no direction: the same reading appears in a strong rise and a strong fall.
Almost every tool on this site assumes a market is doing something. This one exists to tell you whether it is, which is a smaller claim and a more useful one.
How it works
Three lines, and only one of them is average directional index (ADX).
+DI measures how much of recent movement was upward: today’s high minus yesterday’s high, counted only when that beats the fall in the low. −DI is the mirror. Both are smoothed over 14 bars.
ADX is the gap between them, smoothed again. When +DI and −DI are far apart, one side is dominating and ADX is high. When they are tangled, ADX is low.
So ADX cannot have direction in it — it is built from an absolute difference, and the sign is thrown away by construction.
What the number means
Below 25 is the conventional threshold for no trend. Through the choppy stretch above, ADX bottomed at 23.5.
Above 25 is a trend. Through the advance on the same chart it reached 38.2.
That is the whole reading, and the fact that one chart produced both is the point — the market did not change instrument, it changed condition, and the line noticed.
It says nothing about which way
ADX reached 35.2 during the decline.
This is the most common misreading of the tool and it is definitional rather than unlucky. A strong downtrend is a strong trend, so it produces a high reading exactly as a strong uptrend does.
A rising ADX means “whatever is happening is getting more decisive.” Nothing more.
The direction is in +DI and −DI, and they crossed 10 times across this chart — which is a useful warning about treating those crossings as signals.
What it is actually for
It is a filter, and it is the only common indicator that will tell you to do nothing.
Every oscillator on this site has a condition it works in and a condition it misleads in. The stochastic needs a trading range; Supertrend needs a trend. ADX is the thing that tells you which one you are in before you pick.
Used that way it does real work: read ADX first, then choose the tool. Used as a signal it does nothing at all, because it has no direction to give you.
The settings
One number: the smoothing length, 14 by default.
Shortening it does not make the filter sharper. On this chart length 7 spent 50 bars above 25 against length 14’s 57 — a different count, not a better one, and each threshold crossing arrives earlier and less reliably.
25 is a convention, not a measurement. Some traders use 20, some 30. Nothing in the arithmetic privileges any of them, so the honest position is that it is a rough boundary rather than a line.
The warm-up is longer than you think
A practical note that costs people money on short charts, and almost nobody mentions it.
ADX is a smoothing of a smoothing. +DI and −DI are already 14-bar averages; ADX averages the gap between them over another 14. So the line is not meaningful until roughly 28 bars have passed.
Before that it produces numbers anyway. On the raw calculation for this chart, bars 1 and 2 read 100 — because −DI is still zero there, which makes the arithmetic return its maximum by construction. It then decays through the nineties and eighties as real data arrives.
Those are not readings, they are an absence of data wearing a number. Most platforms plot them. If you load ADX onto a chart and act on the first thing you see, you are acting on the warm-up — and the charts on this page suppress those bars for exactly that reason.
A worked example
Look at ADX before anything else. One number, two seconds.
Below 25: put the trend tools away. No moving average crossover, no Supertrend, no breakout entry — those all need a trend to work and the filter has just said there is not one.
Above 25: check +DI against −DI for the direction, then go to price for the actual levels. The panel has told you a trend exists; it has not told you where to buy.
And re-check it, because the condition changes. The same chart above went from 23.5 to 38.2 and back, which is two different markets inside one screen.
The original data
Across our study of 24,971 trading videos, 73 cover ADX. The median one gets 17,429 views, 70% never pass 50,000, and the median length is 9.2 minutes.
That is a healthy median on a small field — above commodity channel index (CCI) at 12,334 and well above Bollinger Bands at 3,516, on 73 videos against 384.
The corpus carries description text for 65 of those 73, and across those 65, one mentions invalidation, failure, or what a bad read looks like.
When it fails
It is late, and lateness matters more here
Five bars late on this chart — and it is a smoothing of a smoothing, so that is structural.
Lateness in a filter is worse than lateness in a signal. By the time ADX confirms a trend, a meaningful part of the trend has already happened; by the time it confirms the trend has ended, so has your position.
A falling ADX is not a reversal
It means the current move is losing conviction. That is consistent with a pause, a range, or a turn, and the line cannot separate them. Reading a falling ADX as “sell” imports a direction the indicator does not contain.
The DI crossings are noise
Ten of them on one chart. They are two smoothed averages crossing, which is the same objection the technical analysis page makes to derived indicators agreeing with each other.
You read it once the trend had run
A rising ADX at the start of a real trend and a rising ADX at the start of a two-day move look identical. Cover the right-hand side and the filter is as uncertain as everything else here — it just expresses the uncertainty as a number.
Related
Market structure answers the same question from price, and gives you the direction ADX withholds.
Trading range is the condition a reading below 25 is describing.
And average true range (ATR) is the other measurement with no direction in it — size rather than strength, and the two are often confused.
I use this as a filter rather than a signal, which I think is the only sensible way to run it. Before I look at anything else I want to know whether this market is trending or going nowhere, because the tools I would reach for are completely different in the two cases. What I do not do is trade the ADX line itself. It has no direction in it, so a rising ADX tells me a move is getting stronger without telling me which move.
— Michael Whitman, from this video
This page is educational, not financial advice. Test every idea on your own charts before risking money.