ADX (Trend Strength)
Is there even a trend to trade? ADX answers strength (not direction) — the regime filter for every other tool.
Core IndicatorsIntermediate 5 min read· Lesson 12 of 13 in Technical Analysis
Explanation & formula
From directional movement: +DI (up-move pressure) and −DI (down-move pressure), each Wilder-smoothed; ADX is the smoothed magnitude of their imbalance, 0–100.
Interpretation
ADX < 20: no trend — mean-reversion tactics and band-fades work, breakouts fail. ADX > 25: real trend — pullback buying and MA systems shine, top-picking dies. Rising ADX = strengthening trend (whichever direction); falling ADX after a run = trend maturing. Direction comes from ±DI or plain price structure.
Common mistakes
Reading high ADX as 'overbought' — it's strength, and strength persists. And running trend strategies in ADX<20 chop, then blaming the strategy.