What is a strong ADX reading?

Generally, a reading above 25 indicates a strong trend, while below 20 suggests a range-bound or weak market.

Does ADX show trend direction?

The ADX line itself only shows strength. You use the +DI and -DI lines to determine if the trend is bullish or bearish.

Can I use ADX for exits?

Yes, when ADX begins to curl down from a high level (above 40-50), it often signals that the current trend is losing steam.

Is ADX a lagging indicator?

Yes, like most moving-average based indicators, ADX reacts to price changes rather than predicting them.

Education · Indicators

ADX: The trend strength master.

The Average Directional Index (ADX) tells you one thing very well: how strong the current trend is. It saves you from 'whipsaw' losses in sideways markets.

Understanding the scale.

ADX fluctuates between 0 and 100. It doesn't care if the price is going up or down; it only cares how fast it's getting there.

Levels to watch: Below 20 is 'quiet', 25-50 is 'trending', and above 50 is an 'extreme trend' that may be due for a pause.

The DI lines.

+DI (Positive Directional Index): Measures upward pressure.
-DI (Negative Directional Index): Measures downward pressure.
A crossover where +DI moves above -DI while ADX rises is a classic buy signal.
A crossover where -DI moves above +DI while ADX rises is a classic sell signal.

Trading the range.

When ADX is below 20, trend-following systems usually fail. This is the time to switch to mean-reversion strategies or simply wait for a breakout.

FAQ

Common questions.

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Moving Averages

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