A market can move a lot in a week and end up exactly where it started. Price swings up, drops back, jumps again on a headline and settles, and a trader looking at any one of those moves might think a trend is under way. The ADX indicator was designed for that moment. It measures how strong a trend is, without saying which way it’s heading, and it’s one of the simplest ways to tell a market that’s going somewhere from one that’s just moving around.
Quick answer: The Average Directional Index, or ADX, measures trend strength on a scale of 0 to 100. Readings under 20 suggest a weak or absent trend, while readings above 40 point to a strong one. ADX doesn’t show direction. Traders pair it with the +DI and −DI lines or price action, and treat it as a filter that works best alongside other signals.
See Which Markets Are Trending Today
Forex, indices, gold, crypto and more update live on one screen, so you can spot the strongest moves before you open a chart.
What Is the ADX Indicator?
The ADX indicator was developed by J. Welles Wilder in 1978, the same year he introduced the RSI and the Average True Range. It’s calculated from two other lines, the positive and negative directional indicators, and its standard setting is 14 periods, according to its entry on Wikipedia.
| Line | What it shows |
|---|---|
| ADX | How strong the trend is, in either direction |
| +DI (positive directional indicator) | The strength of upward moves |
| −DI (negative directional indicator) | The strength of downward moves |
Together, the three lines are often called the Directional Movement Index, or DMI.
Trend Strength vs Trend Direction
Most of the confusion around ADX starts here. A rising ADX means the trend is getting stronger, and that’s true in a downtrend as much as an uptrend. A falling market with ADX at 45 is trending hard. It just happens to be trending down.
To see the direction, look at the directional lines.
- +DI above −DI: upward moves are stronger, and the trend leans up
- −DI above +DI: downward moves are stronger, and the trend leans down
- The two lines tangled together: neither side has control
Price itself is often the clearest guide. If ADX is rising and price is making higher highs, the uptrend is strengthening.
How to Read ADX Values
| ADX reading | What it often suggests |
|---|---|
| Under 20 | Weak or no trend, with price moving sideways |
| 20 to 25 | A trend may be starting to form |
| 25 to 40 | A clear trend |
| Above 40 | A strong trend |
| Above 50 | An exceptionally strong trend, which can also mean the move is stretched |
Wilder’s thresholds were 20 and 40, and many traders also use 25 as the line where a trend becomes tradable. The direction ADX is moving counts as much as the number itself. An ADX of 30 and rising says something different from an ADX of 30 that’s been falling for a week.
Using ADX to Filter Range-Bound Markets
ADX is most useful as a way to decide which kind of approach suits a market right now.
- ADX under 20: price is likely to bounce between support and resistance, and trend-following signals, like moving average crossovers, tend to produce false starts
- ADX rising through 25: a trend may be getting going, and pullbacks within it are often more useful than trying to pick tops and bottoms
- ADX high and starting to fall: the trend is losing strength, which can be an early warning to tighten stops or expect a pause
This works particularly well alongside momentum signals. RSI divergence in a market with ADX at 15 means something quite different from the same divergence with ADX at 45, as our article on RSI divergence explains.
Why ADX Shouldn’t Be Used on Its Own
- It lags: ADX is smoothed over 14 periods, and by the time it confirms a strong trend, a good part of the move may have happened
- It doesn’t give entry points: knowing a trend is strong doesn’t tell you where to buy or sell
- High readings can come before a reversal: an ADX above 50 often appears near the end of a sharp move, when the trend is at its most stretched
- News can override it: a central bank decision can turn a quiet, low-ADX market into a fast one in minutes, and the economic calendar shows what’s coming
Pairing ADX with a trend tool like the Ichimoku Cloud, covered in our article on the Ichimoku Cloud, and a volatility measure like ATR, explained in our guide to ATR, gives a much fuller picture. Trading on any indicator carries risk, and no signal works every time.
ADX Across Different Markets
Trend strength can vary a lot between markets on the same day. A currency pair reacting to a central bank decision might be trending with ADX above 35, while a major stock index drifts in a range with ADX under 18. The Currency Heatmap is a quick way to see which currencies are moving strongly before you check the ADX on a pair.
Frequently Asked Questions
What is a good ADX value?
An ADX value above 25 is often treated as a sign of a clear trend, and above 40 suggests a strong one. Readings under 20 point to a weak or sideways market. There’s no single good value, because it depends on the approach. Trend followers look for rising ADX, while range traders prefer low readings.
Does ADX show the direction of a trend?
ADX measures trend strength and leaves direction to other lines. A high ADX can appear in an uptrend or a downtrend. To see the direction, traders look at the +DI and −DI lines, where +DI above −DI suggests an uptrend and −DI above +DI suggests a downtrend, or they check if price is making higher or lower highs.
What is the difference between ADX and DMI?
DMI, the Directional Movement Index, is the full set of three lines developed by J. Welles Wilder, made up of ADX, +DI and −DI. ADX is the line that measures trend strength, while +DI and −DI show the strength of upward and downward moves. Many charts show all three together.
What is the best setting for ADX?
The standard ADX setting is 14 periods, the length Wilder originally used. A shorter setting, like 7 or 10, reacts faster but gives more false signals, while a longer one, like 20 or 30, is smoother and slower. Most traders keep the default so their readings match the widely used thresholds.
