What is the ADX indicator? Trend strength, not direction

The Average Directional Index is a trend-strength indicator. J. Welles Wilder Jr. introduced it in his 1978 book New Concepts in Technical Trading Systems, the same book that introduced RSI and the average true range. It is part of his Directional Movement system: three lines usually shown together in a panel under the chart.

The drawing at the top shows the idea. While price trends up on the left, the ADX line climbs above 25; when price goes sideways on the right, it sinks below 20. A strong downtrend pushes ADX up just as much: the line says how hard price is moving, never which way.

ADX (Average Directional Index)
One line from 0 to 100 that rises when price moves strongly in either direction and falls when the move fades or price goes sideways.
+DI (positive directional indicator)
Measures the strength of upward moves. When +DI is above −DI, up-moves have dominated recently.
−DI (negative directional indicator)
Measures the strength of downward moves. When −DI is on top, down-moves have dominated.
DMI (Directional Movement Index)
The full set: ADX, +DI and −DI shown together.

How the ADX is calculated, in plain words

You never need to compute ADX by hand, but the steps explain its behavior. Wilder’s default length is 14 periods, smoothed with his method, the one behind ATR.

The step that matters most is DX, which compares the two DI lines: DX = 100 × the gap between +DI and −DI ÷ their sum. Hypothetical numbers show why direction drops out. With +DI at 30 and −DI at 10, DX = 100 × 20 ÷ 40 = 50. Flip them, +DI at 10 and −DI at 30, and DX is still 50. With +DI at 22 and −DI at 18, DX = 100 × 4 ÷ 40 = 10: the two sides are nearly balanced, so there is no trend to measure.

The full chain has two layers of smoothing, first the DI lines and then DX, which is why ADX turns late and moves slowly even after a sharp candle:

  1. Directional movement: +DM is the current bar’s high minus the previous bar’s high; −DM is the previous bar’s low minus the current bar’s low. Only the larger of the two counts, and only if it is positive; the other is set to zero.
  2. True range: the same candle-size measure ATR uses, gaps included.
  3. +DI and −DI: smooth +DM, −DM and true range over 14 periods, then +DI = 100 × smoothed +DM ÷ smoothed true range, and the same for −DI.
  4. DX: computed from +DI and −DI as above, bar by bar.
  5. ADX: a 14-period Wilder average of DX.

How to read the ADX: 20 and 25 are conventions, not laws

TradingView’s help page for its DMI says Wilder treated a reading above 25 as a strong trend and below 20 as a weak or non-existent trend, with the zone between undecided. Most guides still use those lines, but they are rules of thumb: the same page notes that suitable levels depend on the instrument.

  • Below 20: little directional movement. Range tactics fit better; trend entries tend to stall.
  • 20 to 25: grey zone. A trend may be starting or ending; wait for the next readings.
  • Above 25 and rising: a trend is under way and gaining strength. Trend tactics fit.
  • High but falling: the trend is losing strength. It may pause, drift sideways or reverse, and a falling ADX alone does not tell you which.

+DI and −DI: where the direction comes from

Read direction from the DI lines: +DI above −DI means up-moves have been stronger, −DI above +DI means down-moves have. A cross, as in the drawing below, shows that the balance has shifted; ADX then tells you whether the new move has force.

TradingView’s DMI help page describes the classic version: a bullish cross counts only with ADX above 25, the signal is stronger if ADX is rising, and the stop goes at the low of the signal day. Many traders relax the 25 rule and simply want ADX turning up after the cross.

Hypothetical: on a 15-minute chart, a stock has been falling. +DI crosses above −DI at $42.60 while ADX is 17, the third cross of the session. Treat it as a heads-up, not an entry. Two bars later ADX turns up to 21, then 24, as price holds above $42.50: now the cross has support, and you look for an entry at a level with a stop under the swing low. If ADX keeps sinking instead, the lines often cross back within a few bars.

Turn your phone sideways to read the drawing. Tap to close.

A hand-drawn chart: price turns from down to up on top; below, the green +DI line crosses above the red −DI line, circled and labeled +DI over −DI, and the ADX line starts rising after the cross, labeled ADX rising.

How to use the ADX indicator: a filter that picks your strategy

ADX works best as a switch between two playbooks, decided before you look for an entry. It does not give entries itself: the entry still comes from price at a level, confirmed by a closed candle, with a stop where the idea is wrong and a size that keeps the loss small.

  • ADX below 20 and flat: range tactics. Buy near support, sell near resistance, skip the middle.
  • ADX above 25 and rising, with the DI lines clearly apart: trend tactics. Trade pullbacks in the direction of the DI on top.
  • ADX between 20 and 25, or falling from a high: stand aside or trade smaller until the picture clears.
  • Check ADX on the timeframe you trade and on a higher one: a 5-minute range inside a strong 1-hour trend can break in the direction of the bigger trend. See multi-timeframe analysis.

When ADX is low: range tactics, with a worked example

A low, flat ADX says neither side is in control, which is the condition range trading needs. The drawing below shows the playbook: buy near support, sell near resistance, leave the middle third alone, and keep stops just outside the range. The range trading strategy guide covers it in depth.

Hypothetical: on a 5-minute chart, ADX has sat near 15 for 90 minutes while a stock swings between a support zone at $50.00–$50.20 and a resistance zone at $51.80–$52.00. Price dips into support and a hammer closes at $50.40: confirmation at a level. Buy there with a stop at $49.90, just below the zone, for $0.50 of risk. The target is $51.70, just under resistance: $1.30, about 2.6R. Risking 1% of a $10,000 account ($100) allows 200 shares ($100 ÷ $0.50).

The failure case: the next dip does not bounce. A candle closes at $49.80, below support, and ADX climbs past 20 as −DI pulls away from +DI. The stop at $49.90 costs about $100 as planned (a little more if it slips), and the range is over: do not buy the next dip assuming the old floor still holds.

Turn your phone sideways to read the drawing. Tap to close.

A hand-drawn range: price bounces between a support zone at the bottom and a resistance zone at the top, with buy triangles near support, sell triangles near resistance, the middle third lightly shaded as a no-trade zone, and dotted stops just outside the range.

When ADX is high: trend tactics, with a worked example

A rising ADX above 25, with +DI well above −DI, says buyers are in control. Now the range playbook turns dangerous, because selling every high fights the trend. The usual alternative is to buy pullbacks, as in the drawing below: price dips to the fast EMA, holds, and a buy signal prints. The EMA trading strategy and pullback trading strategy guides go further.

Hypothetical: on a 15-minute chart, ADX has risen from 22 to 31, with +DI at 32 and −DI at 12. Price pulls back to the 9 EMA near $120.00, and a candle closes back up at $120.40. Buy, with the stop under the pullback low at $119.60 ($0.80 of risk) and the target at the prior swing high, $122.00 ($1.60, or 2R). The same $100 risk allows 125 shares ($100 ÷ $0.80).

The failure case: the pullback keeps going. A candle closes at $119.50, through the stop, and −DI crosses back above +DI. The loss is the planned $100. A high ADX said the trend was strong over the last bars; it promised nothing about the next one.

Turn your phone sideways to read the drawing. Tap to close.

A hand-drawn uptrend with a fast EMA and a slow EMA; price pulls back to the fast EMA, holds it and prints a buy signal.

The ADX lag and other failure cases

Because of its double smoothing, ADX confirms a trend after it has started and admits the end after it has passed. By the time it climbs above 25, part of the move is gone; by the time it rolls over, price has often turned already. Price breaks first, so let price and your stop, not ADX, tell you when a trade is wrong.

The drawing below shows the most common version. An uptrend holds a rising trendline through three touches, then a candle closes below it. Hypothetically, ADX still reads 34 at that moment, because it reflects the strong buying of the last 14 bars or so. A trader who waits for ADX to fall under 20 before accepting that the trend is over gives back far more than one who respects the trendline break and the stop.

  • Reading a high ADX as bullish. A sell-off pushes ADX up as fast as a rally; check which DI is on top.
  • Fading a low-ADX range just before it breaks. ADX stays low until after the breakout, so a short at the top of the range gets run over; the stop just outside the range is what limits the damage.
  • Trading every DI cross. With ADX under 20 the lines cross back and forth, and each cross tends to be a small loss.
  • Treating a falling ADX as a reversal signal. It means less force; the trend can keep crawling the same way.

Turn your phone sideways to read the drawing. Tap to close.

A hand-drawn uptrend: a rising trendline under three higher lows, with the touches circled 1, 2 and 3, a dashed channel line over the highs, and a final candle that closes below the trendline, labeled break.

ADX settings on TradingView: ADX vs DMI

Open Indicators on TradingView and search for “ADX” or “DMI”. The built-in Average Directional Index shows the ADX line alone: its help page notes that it does not display +DI and −DI and points to Directional Movement (DMI), which plots ADX, +DI and −DI together. The DMI version puts direction and strength in one panel.

The DMI settings have two lengths, one for the ADX smoothing and one for the DI lines (DI Length), both 14 by default, as in Wilder’s book. A shorter length reacts faster and gives more false readings; a longer one is smoother and later. Start at 14, the setting most guides refer to. See best TradingView settings for the rest of the chart.

UpTickFlow, our invite-only TradingView indicator, follows a similar idea of staying out of chop, so weigh this accordingly. It does not give ADX or DI-cross signals. It waits for a candle to close at a level, draws an entry, a stop and a target before the trade, scores the setup from 0 to 100 and stays quiet in chop: a second check, not a scanner.