ADX — Average Directional Index

Trend

What it measures

ADX measures the strength of a trend, regardless of direction, on a 0–100 scale. It's accompanied by +DI (positive directional indicator) and -DI (negative directional indicator) which show the direction. ADX does NOT tell you which way the trend goes — it tells you HOW STRONG the trend is. This is critical for avoiding false signals from other indicators in ranging markets.

How readings are interpreted

ADX below 20 indicates a weak trend or ranging market — oscillators like RSI/Stochastic work better here. ADX above 25 indicates a developing trend — trend-following indicators become more reliable. ADX above 40 signals a very strong trend. The DI crossover (+DI crosses above -DI) is a directional signal. ADX falling from a high level means the trend is weakening, even if price keeps moving.

Conventional levels

ADX < 20: Ranging/weak trend — avoid trend-following strategies
ADX 20–25: Trend developing — begin monitoring for entry
ADX > 25: Confirmed trend — trend-following strategies are valid
ADX > 40: Strong trend — high-conviction directional moves
+DI crosses above -DI: bullish directional signal
-DI crosses above +DI: bearish directional signal

Where it works, and where it does not

ADX is a regime filter — it tells you WHICH strategy to use. Below 20, use RSI/Stochastic for range trading. Above 25, use trend-following (MACD, EMA crossovers). It doesn't directly tell you when to buy/sell — it filters other indicators. Works on all timeframes and asset classes.

Commonly read alongside

RSI: RSI reversal readings are conventionally given more weight when ADX is below 20 (confirmed range)
MACD: crossovers are conventionally given more weight when ADX is above 20 (confirmed trend)
Supertrend: ADX > 25 + Supertrend signal = very high-conviction trade

Known limitations

ADX rising doesn't mean the trend will continue indefinitely — it can peak near exhaustion
ADX lags — it confirms a trend that's already underway, not one forming
Using ADX DI crossovers as direct buy/sell signals produces many false signals

In practice

ADX is often used as a filter layer — oscillators such as RSI in ranges (ADX < 20), trend-following methods in trends (ADX > 25)
A peak and turn-down above 40 frequently precedes a significant reversal or correction
The conventional bullish configuration: ADX rising from below 20 with +DI crossing above -DI, read as intact until ADX turns down
On weekly data, ADX > 25 with +DI above -DI is treated as the strongest long-term trend confirmation

On the test bench

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This is reference material, not advice. It describes what each indicator measures and how its readings are conventionally interpreted. Nothing here is a recommendation to buy or sell anything, and no indicator predicts future prices. GU Analyser is an analytical tool — no money is ever traded here.