ADX (Average Directional Index)

ADX (Average Directional Index) is a technical analysis indicator that measures the strength of a trend without indicating its direction. It helps understand whether the market has a clearly defined trend or if the price is moving sideways (flat).

ADX is calculated based on two additional lines:

• +DI (Positive Directional Index) — strength of upward movement
• -DI (Negative Directional Index) — strength of downward movement

The smoothed ADX line shows the intensity of price movement.

ADX values are always in the range 0-100:

| Range | Meaning | |-------|---------| | 0-20 | No trend (sideways movement, flat) | | 20-25 | Trend is starting to form | | 25-50 | Strong trend | | 50-75 | Very strong trend | | 75-100 | Extremely strong trend (correction possible) |

• Period: Number of candles for calculation (default: 14)

ADX does NOT show trend direction. To understand where the price is moving, analyze the relative position of +DI and -DI lines:

• +DI above -DI — uptrend
• -DI above +DI — downtrend

Trade Filtering

• Enter trades only when ADX > 25 to trade in a trend
• Ignore indicator signals during flat phases (ADX < 20)

Breakout Confirmation

• If ADX rises after a support/resistance level breakout — the breakout is confirmed

Exit Signals

• Falling ADX indicates weakening trend — consider partial profit taking

| Condition | Use Case | |-----------|----------| | ADX(14) > 25 | Strong trend present, safe to trade | | ADX(14) < 20 | Flat market, avoid trend-following strategies | | ADX(14) > 50 | Very strong trend | | ADX(14) crosses above 25 | Trend is forming, prepare for entry | | ADX(14) crosses below 25 | Trend is weakening |

• ADX + Moving Averages: ADX confirms trend strength, MA shows direction
• ADX + RSI/RVI: ADX for trend filter, oscillator for entry timing
• ADX + Donchian/Keltner Channel: ADX confirms breakouts
• ADX + CCI: Double confirmation of trend strength

• Use ADX on higher timeframes (1h and above) for more reliable signals
• Standard period: 14
• Entry threshold: 25 (conservative) or 20 (aggressive)

• ADX is a lagging indicator — it doesn't react instantly to sharp price movements
• May lag during sudden market reversals
• Best used for signal confirmation, not as the only decision-making tool

• ADX rising — trend is strengthening
• ADX falling — trend is weakening
• +DI above -DI — uptrend
• -DI above +DI — downtrend