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Glossary · Indicators

ADX (Average Directional Index)

An indicator from 0 to 100 that measures how strong a trend is, regardless of its direction; readings above about 25 suggest trending conditions.

By Sky Trade editorial teamUpdated

The Average Directional Index, developed by J. Welles Wilder, comes with two companion lines: +DI (the positive directional indicator) and −DI (the negative one). +DI measures upward movement, −DI downward movement, and ADX is a smoothed measure of the gap between them, usually over 14 periods.

The key point: ADX measures trend strength, not direction. A rising ADX at 35 can describe a strong downtrend just as well as an uptrend; check whether +DI or −DI is on top to know which.

Common readings, as conventions rather than laws:

  • below 20: weak or no trend, where range tools may fit better;
  • 20–25: a trend may be forming;
  • above 25: trending conditions;
  • very high values that start to fall: the trend is losing steam.

ADX is slow because it is smoothed twice. It often confirms a trend after much of it is over and keeps reading high for a while after the trend ends. Its best job is as a filter for switching between trend-following and range approaches.

The Sky Trade terminal includes ADX among its oscillators. See ADX explained.

Example

On H1, GBP/USD shows ADX at 31 with −DI (28) above +DI (14): a fairly strong downtrend. A day later ADX has dropped to 18 and price is drifting sideways.

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