Average Directional Index (ADX)
Original schematic showing the guide's principal visual relationships.
ADX is Wilder's smoothed average of DX, where DX = 100 × |+DI − −DI|/(+DI + −DI).
Formula and components
A smoothed measure of trend strength that does not by itself identify trend direction.
ADX is Wilder's smoothed average of DX, where DX = 100 × |+DI − −DI|/(+DI + −DI).
How it works
The indicator transforms price, range, or volume observations over a selected lookback. Shorter settings react faster but create more noise; longer settings respond more slowly and emphasize the underlying regime. Always compare the reading with price structure and timeframe.
How to read it
A rising ADX indicates strengthening directional movement; +DI versus −DI supplies direction. Values near 20–25 are commonly used as context, not universal rules.
Practical example
ADX rising from below 20 toward 30 suggests directional movement is strengthening, while +DI above −DI supplies the upward direction. A high but falling ADX means the trend is losing strength, not necessarily that price must reverse immediately.
Confirmation checklist
Use slope, price position, and agreement across more than one lookback. A trend reading is more reliable when price structure and directional strength point the same way.
Limitations and false signals
ADX can remain high after the best part of a move has passed and can rise during both advances and declines.
Limitations and false signals
Frequently asked questions
What does this pattern or indicator describe?
A smoothed measure of trend strength that does not by itself identify trend direction.
How should the signal be confirmed?
A rising ADX indicates strengthening directional movement; +DI versus −DI supplies direction. Values near 20–25 are commonly used as context, not universal rules. Use slope, price position, and agreement across more than one lookback. A trend reading is more reliable when price structure and directional strength point the same way.
What can cause a false signal?
ADX can remain high after the best part of a move has passed and can rise during both advances and declines.