ADX Trend Strength

The Average Directional Index (ADX) measures trend strength, not direction. It ranges from 0 to 100. Values above 25 typically indicate a trending market; below 25 suggests a ranging or weak trend. ADX is used with +DI and -DI to filter trades and avoid choppy conditions.

ADX is derived from the Directional Movement System. +DI measures positive directional movement; -DI measures negative. ADX smooths the difference between them to show trend strength. When +DI is above -DI, the trend is up; when -DI is above +DI, the trend is down. ADX above 25 means the trend is strong enough to trade.

Use ADX for

1. Trend filter: Only take trend-following trades when ADX is above 25.
2. Direction: +DI above -DI suggests uptrend; -DI above +DI suggests downtrend.
3. Crossover: When +DI crosses above -DI with ADX rising, consider longs. Opposite for shorts.
4. Ranging filter: When ADX is below 20, avoid trend strategies; use mean reversion instead.

Default period is 14. Use 14 for most timeframes. Shorter periods (7) react faster; longer (21) smooth more.

Do not use ADX for entry timing—it lags. Use it to filter: trade or not trade. Do not assume ADX direction—ADX can rise in both uptrends and downtrends. Combine with price action for entries.