Indicator reference › ADX

ADX (Average Directional Index) explained

Trend

What ADX 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 ADX 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 ADX levels

Where ADX 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.

Indicators commonly read alongside ADX

Known limitations of ADX

ADX in practice

Other trend indicators

Supertrend
Ichimoku Cloud
Aroon Indicator
Vortex Indicator

On the test bench

Do Donchian Channel Breakouts Actually Work?
Three classic breakout rules tested across 179 US stocks, with Buy & Hold comparisons, fees, drawdowns, ADX and different market conditions.

Testing ideas built on ADX

A reading of ADX can be written as an exact rule and checked against historical data — as a full strategy with entries, exits and costs, or as a single condition and what followed it:

How to backtest a trading strategy without code
Event analysis: what follows a market event

Plot it yourself. Add this indicator to a chart, change every parameter and watch the line move, then backtest how the rule would have behaved on historical data — free on the S&P 500 ETF, no card.

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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.