What Is ADX (Average Directional Index)?
ADX (Average Directional Index), developed by J. Welles Wilder, measures the strength of a trend without indicating its direction. Values range from 0 to 100, calculated from two underlying lines: +DI (positive directional indicator) and -DI (negative directional indicator).
The conventional reading is: ADX below 20 = no trend (range-bound or choppy market); ADX above 25 = trending market worth following; ADX above 40 = strong trend, possibly extended. Many trend-following systems require ADX > 25 as a filter before taking signals.
ADX pairs well with directional indicators because by itself it tells you 'should I trust a trend signal right now?' but not 'which way is the trend.' Combine it with a moving-average direction filter or with +DI vs -DI comparisons for a complete trend-following toolkit.
Related terms
- MACD (Moving Average Convergence Divergence) — Trend-following momentum indicator showing the difference between two exponential moving averages.
- RSI (Relative Strength Index) — A momentum oscillator (0-100) measuring the speed and magnitude of recent price changes.
- Trend — The general direction of price movement over a period — uptrend, downtrend, or sideways.
- Moving Average — A line plotted on a chart showing the average price over a chosen lookback period.