Complete Guide to the ADX Trend Strength Indicator
— Practical Interpretation of +DI·-DI
The ADX (Average Directional Index) indicates the strength of a trend, not its direction, on a scale of 0 to 100. An ADX above 25 signifies that a trend has formed, and the direction of movement is determined by +DI and -DI.
What is ADX?
ADX (Average Directional Index) is an indicator that shows the strength of a trend on a scale of 0 to 100, rather than its direction. It was created by Welles Wilder, and its core purpose is to determine "Is there a trend now, or is it sideways?" The direction (up/down) is indicated by the accompanying +DI·−DI.
Roles of +DI · −DI · ADX
- +DI — Strength of upward movement
- −DI — Strength of downward movement
- ADX — How consistently the gap between the two DIs is maintained (= trend strength)
In other words, we look at direction with +DI/−DI and strength with ADX. If +DI is above −DI, it indicates upward dominance, and if ADX is high in that state, it signifies a "strong upward trend."
ADX 25 Criteria
Generally, an ADX above 25 is considered a "market with a trend," while below 25 is seen as "sideways/no trend." In a sideways range, the reliability of directional indicators decreases, so ADX serves as a filter to check "Is it appropriate to use trend strategies now?"
Pitfalls of High ADX
Combination with Bollinger Squeeze
Bollinger Squeeze captures the 'imminent' volatility explosion, while ADX confirms whether that breakout has actually developed into a trend. The flow of squeeze occurrence → breakout → ADX crossing 25 is a powerful combination that solidifies volatility contraction into a trend. DawnScan combines these two to enhance scoring.
Alongside Other Signals
ADX (trend) is combined with OBV (supply and demand) · Relative Strength (strength compared to the market) · RSI (momentum) for comprehensive judgment. For the overall flow, refer to pre-breakout early signal overview · methodology.
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