Definition
ADX (Average Directional Index) is a technical indicator that measures the strength of a price trend, regardless of whether that trend is up or down. It’s plotted as a single line, typically ranging from 0 to 100, derived from a stock’s directional movement over a set period (commonly 14 days).
How it’s calculated (conceptually)
ADX is built from two component lines — +DI (positive directional indicator) and -DI (negative directional indicator) — which measure upward and downward price movement respectively. ADX itself is a smoothed average of the difference between +DI and -DI, which is why it reflects strength rather than direction.
Reading the levels
| ADX range | Common interpretation |
|---|---|
| 0–20 | Weak or absent trend — often range-bound, choppy price action |
| 20–25 | Trend beginning to establish — a common threshold for "real trend" filters |
| 25–40 | Established, tradeable trend |
| 40+ | Strong trend (can also signal a trend is extended/mature) |
Why direction still needs +DI / -DI
ADX alone never tells you which way the trend is going. A rising ADX with +DI above -DI suggests trend strength to the upside; a rising ADX with -DI above +DI suggests trend strength to the downside. Always read the two together.
Common use: a trend-strength filter
Many trend-following approaches use a minimum ADX threshold (commonly around 20) as a hard filter — setups below that level are treated as too directionless to trust, regardless of how a chart pattern looks visually. This doesn’t make ADX predictive on its own; it’s typically combined with momentum indicators (RSI, MFI) and price-structure checks.
Related terms
- +DI / -DI — the directional components that pair with ADX
- RSI — a momentum oscillator, often used alongside ADX
- Moving average — commonly used together with ADX to define both trend direction and strength
StockRanker Research Desk
The StockRanker Research Desk publishes independent, educational market and personal-finance content for Indian readers. We are not SEBI-registered analysts or advisers.
