ADX: how strong is the trend?
ADX measures the strength of a trend, not its direction; above 25 describes a clear trend, below it a directionless market. The +DI and −DI lines tell the direction.
In the panel below the chart you see three lines. The grey line is ADX. The orange line is +DI, the yellow line is −DI. The dashed horizontal line in the panel is the 25 level.
ADX has a different job from most indicators: it measures strength, not direction. If ADX is rising, the market is moving in a determined direction; that direction can be up or down. If ADX is falling, the move is losing strength. The general rule of thumb is that ADX above 25 means a clear trend, and below 20 means a directionless or sideways market.
To learn the direction you look at the other two lines. +DI shows the strength of upward moves; −DI shows the strength of downward moves. If the orange line is above the yellow one, buyers dominate; below it, sellers do. So a strong uptrend looks like this: ADX above 25 and rising, orange line above yellow.
Look at the periods on the chart when ADX was above 25 and see what price was doing. Price usually moves steadily in one direction during those periods. When ADX is low, price goes up and down; trend-following methods struggle in those periods.
Also remember that ADX lags: because it is calculated with 14-candle smoothing, it rises some time after a trend starts and falls some time after it ends. So it is better to use ADX not as a ‘trend starting’ alarm, but as the answer to ‘is the market I am in trending or sideways?’
How to read it
- First look at the ADX level: above 25 is trending, below 20 is a directionless market. The area in between is a transition zone.
- Then read the direction from the DI lines: orange (+DI) above yellow (−DI) means the upside dominates, below means the downside does.
- Look at the slope of ADX: a rising ADX points to a strengthening trend, a falling one to a weakening trend; if ADX starts to turn down from very high levels, the trend may be tired.
- Choose your strategy by ADX: buying pullbacks suits a strong trend, while using the edges of the range suits a directionless market.
In this state right now
Liquid symbols with ADX above 30 on the daily chart right now, meaning they are inside a clear trend.
Loading the live list…
We measured
We tested the rule ‘if ADX is below 20 the market is sideways, drop the signal’ on crypto reversal signals. The rule gave no consistent improvement; on the 15-minute chart it even worked in reverse: the dropped signals were better than the ones kept. Using ADX on its own as a filter produced no edge in our measurement.
Source: BBL measurement bench: crypto, 4 hour / 1 hour / 15 minute, ADX14 < 20 filter, reversal signals ·
Trap
The most common mistake is reading a high ADX as ‘going up’. A stock with ADX 40 may be in a steep downtrend; only the DI lines tell the direction. The second mistake is using ADX as a simple on-off filter: in our measurement the rule ‘do not trade when ADX is low’ did not improve signals. Use ADX as an indicator that gives context, not one that makes decisions.
Tip
The momentum text on the analysis card shows the ADX value next to RSI. After this lesson read that number like this: a high ADX means trend strength, a low one means indecision.
Glossary
- ADX
- An indicator measuring trend strength from 0 to 100; it does not tell direction.
- +DI
- The strength of upward moves.
- −DI
- The strength of downward moves.
Mini quiz
Try it now
See symbols in a strong trend in the screener →👑 PremiumFor information only, not investment advice.