Average Directional Index (ADX)
Developed by J. Welles Wilder Jr. · 1978
Quick Answer
The Average Directional Index (ADX) is a trend-strength indicator also developed by J. Welles Wilder Jr.
What is the Average Directional Index?
The Average Directional Index (ADX) is a trend-strength indicator also developed by J. Welles Wilder Jr. and introduced in the same 1978 book that gave us the RSI, Parabolic SAR, and ATR. Unlike most trend indicators that tell you which direction price is moving, the ADX answers a different question: how strong is the current trend, regardless of direction? It is plotted on a 0-100 scale (though readings above 60 are very rare in practice) and is usually displayed with two companion lines, the +DI and -DI, which show directional bias. Professional trend traders use the ADX primarily as a filter: when ADX is below 20, the market is considered choppy and non-trending, and many trend-following strategies are skipped entirely.
How It Works
The ADX is built from three calculations. First, the True Range is computed to normalise for volatility. Second, the directional movement for each bar is split into +DM (up move) and -DM (down move). These are then smoothed over 14 periods (Wilder's standard) and compared to the Average True Range, producing the +DI and -DI lines. The ADX itself is a smoothed absolute difference between +DI and -DI, normalised by their sum. When +DI is above -DI, the trend is up; when -DI is above +DI, the trend is down. The higher the ADX, the stronger the trend — regardless of which direction. The key insight is that ADX rising means trend strengthening, and ADX falling means trend weakening, even if the underlying direction stays the same.
Formula
+DM = Current High - Previous High (if positive and greater than -DM, else 0)
-DM = Previous Low - Current Low (if positive and greater than +DM, else 0)
+DI = 100 × Smoothed(+DM) / ATR
-DI = 100 × Smoothed(-DM) / ATR
DX = 100 × |+DI - -DI| / (+DI + -DI)
ADX = 14-period Wilder smoothing of DXHow to Read the ADX
- 1ADX < 20: weak or no trend, avoid trend-following strategies
- 2ADX 20-25: emerging trend
- 3ADX 25-50: strong trend — ideal for trend-following entries
- 4ADX > 50: very strong trend, but risk of exhaustion grows
- 5+DI above -DI: uptrend
- 6-DI above +DI: downtrend
- 7Rising ADX with DI crossover: high-conviction directional signal
- 8Falling ADX: trend losing strength, prepare for range or reversal
Strengths and Weaknesses
Strengths
- +Uniquely measures trend strength independent of direction
- +Excellent filter for trend-following systems
- +Reduces false signals in range-bound conditions
- +Companion DI lines provide directional context
- +Universally available in all trading platforms
Weaknesses
- −Lagging — confirms trends after they are already developed
- −The 14-period Wilder smoothing produces slow responses
- −Doesn't predict trend direction, only strength
- −DI crossovers can whipsaw in choppy conditions
- −Threshold values are subjective and depend on instrument
Best Timeframes
Works on all timeframes. Daily and 4H are the most common. On lower timeframes the ADX tends to oscillate between choppiness and brief directional spikes.
Best for: Filtering out range-bound conditions before taking trend-following trades. Also effective as an exit tool when ADX peaks and begins to decline.
Example Strategy
ADX Trend Filter with Moving Average: Trade the 50 EMA as a trend filter on the 4H chart, but only take pullback entries when the ADX is above 25 and rising. Enter long on a pullback to the 50 EMA in an uptrend, place the stop below the EMA, and exit when the ADX rolls over below 25. The ADX ensures you only trade during strong trends and keeps you out of the choppy conditions that kill moving average systems.
This example is educational, not financial advice. Always backtest any strategy and manage risk with appropriate position sizing.
Related Indicators
Brokers That Offer the ADX
Any broker with MetaTrader 4, MetaTrader 5, or cTrader supports the ADX as a standard indicator. Below are our top EU-regulated picks.
Frequently Asked Questions
What is the Average Directional Index (ADX)?
The Average Directional Index (ADX) is a trend-strength indicator also developed by J. Welles Wilder Jr. and introduced in the same 1978 book that gave us the RSI, Parabolic SAR, and ATR. Unlike most trend indicators that tell you which direction price is moving, the ADX answers a different question: how strong is the current trend, regardless of direction? It is plotted on a 0-100 scale (though readings above 60 are very rare in practice) and is usually displayed with two companion lines, the +DI and -DI, which show directional bias. Professional trend traders use the ADX primarily as a filter: when ADX is below 20, the market is considered choppy and non-trending, and many trend-following strategies are skipped entirely.
Who developed the ADX?
ADX was developed by J. Welles Wilder Jr. in 1978.
What is the formula for the ADX?
+DM = Current High - Previous High (if positive and greater than -DM, else 0) -DM = Previous Low - Current Low (if positive and greater than +DM, else 0) +DI = 100 × Smoothed(+DM) / ATR -DI = 100 × Smoothed(-DM) / ATR DX = 100 × |+DI - -DI| / (+DI + -DI) ADX = 14-period Wilder smoothing of DX
What timeframes work best with ADX?
Works on all timeframes. Daily and 4H are the most common. On lower timeframes the ADX tends to oscillate between choppiness and brief directional spikes.
What is ADX best used for?
Filtering out range-bound conditions before taking trend-following trades. Also effective as an exit tool when ADX peaks and begins to decline.