Adx indicator
Family VI · Charts & indicators
Not to be confused with atr indicator, cci indicator, volume indicator.
ADX indicator stands for Average Directional Index. It is a momentum indicator that quantifies trend strength on a scale from 0 to 100, where higher values indicate a stronger trend. It is typically displayed as a single line in a separate pane below a price chart.
Calculation and interpretation
The ADX is derived from two other lines: the Positive Directional Indicator (+DI) and the Negative Directional Indicator (-DI). These are calculated from the up-move and down-move of successive bars, then smoothed over a chosen period, commonly 14 bars. The ADX is the smoothed average of the absolute difference between +DI and -DI divided by their sum, multiplied by 100.
Values below 20 or 25 often suggest a weak or non-trending market, while values above 25 or 30 indicate a strong trend. The exact thresholds vary by market and timeframe. The ADX does not indicate trend direction; that is shown by which of +DI or -DI is on top.
Worked example
An ADX of 20 suggests a weak trend, as it is at the lower end of the typical range. If the ADX later rises above 25, it would indicate strengthening trend conditions.
Common pitfalls
The ADX is a lagging indicator because it relies on historical price data. It can give false signals in choppy markets, where it may remain low even as price swings occur. It is also not designed to predict reversals; it only reflects the strength of the current trend. Traders often combine it with other tools to confirm entries and exits.
Often confused with
- atr indicator
- The ATR indicator measures market volatility by averaging true range over a period, while the ADX measures trend strength; the ATR is a single line that rises with larger price swings, whereas the ADX rises with stronger directional movement.
- cci indicator
- The CCI indicator measures price deviation from its statistical average to identify overbought and oversold conditions, while the ADX measures trend strength without indicating overbought or oversold; the CCI oscillates around zero with positive and negative values, whereas the ADX is always positive and typically ranges from 0 to 100.
- volume indicator
- The volume indicator tracks the number of shares or contracts traded, reflecting market activity, while the ADX measures trend strength based on price movement; volume is an absolute count that can spike independently of price direction, whereas the ADX is a derived index that stays within a fixed range.
See also
- forex technical analysis indicators
- price action
- fundamental analysis
- support and resistance
- technical analysis
- fibonacci