Trend StrengthIntermediate
ADX
Average Directional Index
ADX measures the strength of a trend, regardless of its direction. Created by J. Welles Wilder, ADX tells you HOW STRONG a trend is, while +DI and -DI tell you its direction.
How It Works
ADX derives from the positive and negative directional movement indicators (+DI and -DI). ADX measures trend strength from 0 to 100. The directional indicators show which direction the trend is heading.
Formula
+DI = 100 × EMA(+DM) / ATR -DI = 100 × EMA(-DM) / ATR DX = 100 × |+DI - -DI| / |+DI + -DI| ADX = EMA(DX, 14)
Signal Interpretation
ADX > 25
Strong trend present. Trade in the direction indicated by +DI/-DI.
ADX < 20
Weak or absent trend — market is ranging. Avoid trend-following strategies.
+DI above -DI
Bullish trend direction.
-DI above +DI
Bearish trend direction.
Use Cases
- ▸Filtering trending vs ranging markets
- ▸Confirming breakout strength
- ▸Combining with RSI/MACD — only trade when ADX > 25
Limitations
- ⚠Lagging indicator
- ⚠Does not indicate trend direction alone
- ⚠Rising ADX can mean either a bullish or bearish trend is strengthening
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BazaarPulse Tip
ADX > 40 in a stock often precedes exhaustion. Wait for ADX to dip back below 30 after a strong trend for potential reversal opportunities.