trend Indicator
What Is Average Directional Index (ADX)?
ADX measures trend strength regardless of direction, helping traders identify strong trends.
Quick Answer
ADX measures trend strength regardless of direction, helping traders identify strong trends.
What Does ADX Measure?
The Average Directional Index (ADX) was developed by J. Welles Wilder Jr. It quantifies trend strength on a scale of 0 to 100, without indicating trend direction. ADX is often used with +DI and -DI (directional indicators) to determine both trend strength and direction. Values above 25 typically indicate a strong trend.
Formula:
ADX = 100 × EMA(|+DI - -DI| / (+DI + -DI))How to Read ADX
- 1ADX below 20 indicates weak or no trend
- 2ADX above 25 indicates strong trend
- 3Rising ADX shows strengthening trend
- 4+DI above -DI indicates bullish trend
How to Use ADX in Trading
✓Filter trades based on trend strength
✓Identify trending vs ranging markets
✓Determine when to use trend strategies
✓Confirm breakout validity
ADX Settings
| Setting | Default | Description |
|---|---|---|
| Period | 14 | Period for ADX calculation |
Common Mistakes to Avoid
✕Using ADX for trend direction (use DI lines)
✕Taking trades when ADX is below 20
✕Expecting ADX to predict reversals
✕Not combining with directional indicators
Use ADX in VaultCharts
VaultCharts includes Average Directional Index with customizable settings. Combine it with our automated pattern detection and trade signals for better analysis.