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ADX (Average Directional Index)

In short

Measures trend strength — NOT direction, just how strong the trend is

ADX tells you how strong a trend is on a scale of 0–100. Above 25 means there's a real trend happening. Below 20 means the market is choppy with no clear direction.

ADX measures trend strength regardless of direction. Calculated from the Directional Movement indicators (+DI and -DI). ADX above 25 confirms a trend is in place. Combined with +DI/-DI crossovers, it provides direction signals.

Formula

ADX = SMA(14) of |+DI - (-DI)| ÷ (+DI + (-DI)) × 100

Thresholds

<20
No trend — range-bound
20-25
Weak trend forming
25-50
Strong trend
>50
Very strong trend

Related concepts

  • RSI (Relative Strength Index) — RSI scores a stock from 0–100. Above 70 means it's been rising so fast it might be due for a pullback (overbought). Below 30 means it's fallen a lot and could bounce (oversold).
  • MACD — MACD compares two moving averages to show momentum. When the fast line crosses above the slow line, it's a buy signal. Cross below = sell signal. Like two runners — when the faster one pulls ahead, momentum is shifting.
  • Supertrend — Supertrend draws a line that flips above or below the price to show the trend. When price is above the line (green), you're in an uptrend. When price falls below (red), the trend has reversed.
  • ATR (Average True Range) — ATR tells you how much a stock typically moves in a day. If a $100 stock has ATR of $3, it moves about 3% daily. High ATR means volatile; low ATR means calm. Useful for setting stop-loss distances.