Average Directional Index (ADX)
The Average Directional Index (ADX) is used to determine when the price is trending strongly. It is non-directional, meaning it quantifies trend strength whether the price is going up or down. It is often plotted with +DI and -DI lines.
Dynamic Chart Demo
* This chart uses synthetic data to demonstrate the indicator's behavior in typical market conditions.
Core Usage
Advantages
- Excellent filter for trend-following strategies
- Helps avoid trading in choppy markets
- Measures pure trend strength
Limitations
- Lagging indicator
- Does not indicate direction by itself
- Can be slow to react to sharp reversals
Calculation Logic
Understanding the mathematical logic behind indicators helps you interpret signals more accurately and avoid misuse in unsuitable market environments.
Common Trading Strategies
ADX Trend Filter
Only take trend trades when ADX is above 25.
DI Crossover
Buy when +DI crosses above -DI; Sell when -DI crosses above +DI. Read the ADX line alongside it to judge how strong that trend is.
Best For
"Filtering out non-trending markets."
Note: Technical indicators are mathematical calculations based on historical price and volume. They should be used as part of a comprehensive trading system, not as a standalone entry signal.