ADX (Average Directional Index)
Measures trend STRENGTH (regardless of direction). Above 25 = real trend.
Continuation
Difficulty: ●●●○○
Reliability: 7/10
Invented by Welles Wilder (1978, same as RSI). Three lines: ADX, +DI, -DI.
Reading
- ADX < 20: no trend, range. Don't trade MA crosses, trend patterns, etc.
- ADX 20-25: transition zone, cautious
- ADX > 25: established trend
- ADX > 50: very strong trend (rare, watch for late-cycle reversal)
Direction via +DI / -DI
ADX says NOTHING about direction. +DI vs -DI does:
- +DI > -DI: uptrend
- -DI > +DI: downtrend
- +DI/-DI cross: reversal signal (but ADX must be > 25 to confirm)
Practical use
ADX is a filter, not an entry signal. Use to decide:
- Low ADX → trade the range (mean reversion)
- High and rising ADX → trade the trend (trend following)
Favorite combo
ADX + moving average crosses. MA cross without ADX confirmation = 60% false signals. With ADX > 25, success rate jumps to 75%+.
When to look
Always, especially before entering a trend signal. Your first filter.
Confirmation
ADX > 25 + DI cross matching the signal direction = clean setup.
Also called: DMI, +DI -DI, Wilder DMI