# ADX (Average Directional Index)

> The ADX measures trend strength, not direction, while +DI and minus DI show which side leads. Learn how to read ADX levels, crossovers and use it as a filter.

Source: https://learn.tradelabsai.com/indicators/adx/  
Track: Indicators · Level: Intermediate · Updated: 2026-10-03  
Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice.  
Cite as: TradeLabs Learn, "ADX (Average Directional Index)", https://learn.tradelabsai.com/indicators/adx/

The Average Directional Index (ADX) measures how strong a trend is, regardless of whether it is up or down. J. Welles Wilder introduced it in 1978, together with the two Directional Indicators: +DI, which measures upward movement, and minus DI, which measures downward movement. Together they answer two questions every trader asks: is the market trending, and if so, which side is in control?

## The three lines

| Line | What it measures |
|---|---|
| ADX | Trend strength, from 0 to 100, regardless of direction |
| +DI | Strength of upward price movement |
| minus DI | Strength of downward price movement |

When +DI is above minus DI, upward movement dominates; when minus DI is above +DI, downward movement dominates. ADX rises when either side dominates strongly and falls when the market moves sideways.

## How it is calculated

The calculation, usually over 14 periods, builds up in steps:

1. **Directional movement:** compare today's high with yesterday's high (upward movement) and today's low with yesterday's low (downward movement). Only the larger counts each day.
2. **True range:** the [ATR (Average True Range)](https://learn.tradelabsai.com/indicators/atr/) concept, the largest of today's range and the gaps from yesterday's close.
3. **+DI and minus DI:** smoothed upward and downward movement divided by smoothed true range, as percentages.
4. **DX:** the absolute difference between +DI and minus DI divided by their sum, times 100.
5. **ADX:** a smoothed average of DX.

```
DX = |(+DI) − (−DI)| ÷ ((+DI) + (−DI)) × 100
ADX = smoothed average of DX over n periods
```

## Reading ADX levels

| ADX | Common interpretation |
|---|---|
| Below 20 | Weak or no trend; ranging market |
| 20 to 25 | Trend may be developing |
| 25 to 40 | Clear trend |
| 40 to 50 and above | Very strong trend; can also signal an overextended move |

These thresholds are guides, not rules. What matters as much as the level is the direction: a rising ADX means the trend is strengthening, a falling ADX means it is weakening, even if the price is still moving the same way.

**Example: ADX as a filter**
A trader has two strategies: a breakout strategy for trends and a range strategy for sideways markets. On a stock with ADX at 14, falling, the trader uses only the range strategy. On another stock with ADX at 32, rising, and +DI above minus DI, the trader looks for long pullback entries and ignores range signals. ADX decides which tool to use.

## Common ADX signals

1. **Trend filter:** trade trend strategies only when ADX is above 20 to 25; trade range strategies when it is below 20.
2. **DI crossovers:** +DI crossing above minus DI is a bullish signal; minus DI crossing above +DI is bearish. Wilder suggested acting on these mainly when ADX is high enough to confirm a trend.
3. **ADX turning down from high levels:** after a strong trend, a falling ADX from above 40 often shows the trend is losing strength, a reason to tighten stops rather than an automatic reversal signal.
4. **ADX rising from low levels:** a move from below 20 to above 25 can signal a new trend starting, often after a breakout from consolidation. See [Range Structure and Consolidation](https://learn.tradelabsai.com/price-action/consolidation/).

## Common confusion: ADX does not show direction

A high ADX in a falling market means a strong downtrend, not a bullish signal. Always check +DI and minus DI, or price structure, for direction. Many beginners buy because "ADX is high and rising" and end up buying into a strong decline.

## Limitations

- **Lag:** heavy smoothing makes ADX slow to respond.
- **Thresholds vary by market:** some markets trend with lower ADX readings than others.
- **Whipsaws in DI crossovers** when ADX is low.

## Common mistakes

- **Reading high ADX as bullish** without checking direction.
- **Trading every DI crossover** in a market with low ADX.
- **Using ADX alone** for entries rather than as a filter.

## Frequently asked questions

### What does the ADX indicator measure?

The strength of a trend on a scale from 0 to 100, regardless of whether the trend is up or down.

### What is a good ADX level for trend trading?

Many traders consider readings above 25 a sign of a meaningful trend and below 20 a sign of a range.

### How do +DI and minus DI work?

They measure the strength of upward and downward price movement. When +DI is above minus DI, upward movement dominates, and vice versa.

## Sources

- Wikipedia, [Average directional movement index](https://en.wikipedia.org/wiki/Average_directional_movement_index)

## Continue learning

- Next lesson: [Parabolic SAR](https://learn.tradelabsai.com/indicators/parabolic-sar/)
- Previous lesson: [Rate of Change and Momentum](https://learn.tradelabsai.com/indicators/rate-of-change-and-momentum/)
- Related: [Rate of Change and Momentum](https://learn.tradelabsai.com/indicators/rate-of-change-and-momentum/): ROC and the momentum indicator measure how much price has changed over a set period. Learn the formulas, zero line signals, divergence and momentum strategies.
- Related: [Trend Following](https://learn.tradelabsai.com/strategies/trend-following/): Trend following buys markets that are rising and sells those that are falling. Learn the rules, the evidence, typical results and why patience pays.
- Related: [ATR (Average True Range)](https://learn.tradelabsai.com/indicators/atr/): The Average True Range measures how much an asset typically moves per period. Learn the true range formula, how to use ATR for stops, position sizing and filters.
- Related: [Parabolic SAR](https://learn.tradelabsai.com/indicators/parabolic-sar/): Parabolic SAR places dots that trail price and flip sides when the trend reverses. Learn how it works, the acceleration factor, trailing stop use and its limits.
- Related: [Moving Averages Explained](https://learn.tradelabsai.com/indicators/moving-averages-explained/): Moving averages smooth price to show the trend. Learn SMA vs EMA, popular settings like the 20, 50 and 200 day, crossovers, dynamic support and common mistakes.
- Related: [Range Structure and Consolidation](https://learn.tradelabsai.com/price-action/consolidation/): Consolidation is when price moves sideways between support and resistance. Learn to identify ranges, trade them, spot breakouts and avoid range traps.