Average directional index (ADX)
A trend-strength indicator in its own window below the chart. It rises as a trend gets stronger and falls as the market loses direction.
What the ADX is.
A line from 0 to 100 that rates how strong a trend is, whichever way it is going.
The average directional index, or ADX, measures the strength of a trend. It sits in its own window below the price chart and moves between 0 and 100.
It does not show direction. A strong downtrend and a strong uptrend can give the same reading. Two companion lines, +DI and −DI, show which side has been in control.
J. Welles Wilder Jr. introduced the ADX in 1978. The same book also gave traders the RSI, the average true range and the Parabolic SAR.
How it is calculated.
Wilder built the ADX in layers. Your platform does every step for you.
Measure the directional movement.
Compare each bar with the one before. Upward movement is how far the high rose. Downward movement is how far the low fell. Only the larger one counts, and only above zero.
Measure the true range.
True range is the bar’s full range, including any gap from the previous close. It puts each move in proportion to how volatile the market is.
Turn them into +DI and −DI.
Smooth each movement over 14 periods, divide by the smoothed true range and multiply by 100. +DI tracks upward pressure and −DI downward pressure.
Compare the two, then smooth again.
DX is the gap between +DI and −DI as a share of their total. The ADX is a 14-period Wilder average of DX.
−DI = 100 × smoothed −DM ÷ average true range
DX = 100 × |+DI − −DI| ÷ (+DI + −DI)
ADX = 14-period Wilder average of DX
Wilder’s smoothing is a slow moving average. Each new value keeps thirteen-fourteenths of the previous one and adds one-fourteenth of the latest reading.
How to read it.
Four things traders look at. None of them is a signal on its own.
The level.
Many traders read an ADX above about 25 as a trending market, and below about 20 as weak or no trend. These are conventions, not fixed rules.
The slope.
A rising ADX means the trend is gaining strength, whichever way it runs. A falling ADX means it is losing strength, even while price still moves.
+DI against −DI.
When +DI is above −DI, upward movement has been stronger. When −DI is on top, downward movement has been stronger. A cross shows a shift in pressure.
Choosing your tools.
Some traders use the ADX to choose which other tools to look at. Trend tools, such as moving averages, are often paired with a high reading. Range tools are often paired with a low one.
Because it is smoothed twice, the ADX moves slowly. It describes the trend that has been, so it often turns after price does.
Common mistakes.
Where traders new to the ADX most often go wrong.
Reading a high ADX as bullish. It measures strength only. A falling market can produce the highest readings of all.
Expecting it to be early. It is smoothed twice, so it lags price and often peaks after the sharpest part of a move.
Acting on every +DI and −DI cross. In a range, the two lines cross often and most of those crosses lead nowhere.
Treating 25 as a hard line. Markets and timeframes behave differently, so watch how the ADX behaves on the chart you trade.
Using it on MetaTrader 5.
The ADX is one of MT5’s built-in indicators, on desktop, web and mobile.
Open a chart.
In MetaTrader 5, open the instrument and timeframe you want to study.
Add the indicator.
Go to Insert, then Indicators, then Trend, and choose Average Directional Movement Index.
Check the settings.
The default period is 14. MT5 draws the ADX with +DI and −DI in a separate window below the chart.
Know the second version.
MT5 also lists Average Directional Movement Index Wilder. The formulas on this page follow that version, so the standard one can read differently.
Questions, answered.
What traders ask most about the ADX.
01Who created the ADX?
02Does a high ADX mean price will rise?
03What period should I use?
04Can I use the ADX on forex?
05Can I practise with it first?
Practise it on a demo.
Add the ADX to a free MT5 demo chart and watch it rise and fall with each trend before you trade.
Trading CFDs on a live account puts your capital at risk and you can lose money. A demo does not.