ADX (Average Directional Index)

The Average Directional Index (ADX) measures the strength of a trend regardless of its direction. Developed by J. Welles Wilder Jr., it ranges from 0 to 100, where values above 25 indicate a strong trend and below 20 suggest a range-bound market. It is accompanied by +DI and -DI lines that indicate trend direction.

How ADX Is Used in Trading

ADX is primarily a filter indicator. Rather than generating buy or sell signals directly, it tells traders whether to use trend-following strategies (ADX above 25) or mean-reversion strategies (ADX below 20). This distinction is critical for algorithmic trading systems that need to adapt to market conditions.

The +DI and -DI crossovers provide directional signals. When +DI crosses above -DI, it signals bullish momentum; the reverse signals bearish momentum. These crossovers are most reliable when confirmed by a rising ADX above 25.

A rising ADX indicates strengthening trend momentum, regardless of whether the trend is up or down. A falling ADX suggests the trend is weakening, which often precedes a consolidation or reversal phase.

Access via API

Retrieve ADX with directional indicators:

Returns ADX value, +DI, and -DI components.