Average Directional Index
Definition
The Average Directional Index (ADX) is an indicator that measures how strongly price is trending, in either direction, on a scale from 0 to 100, without saying which way the trend points.
Example
“With the 14-period ADX at 15 and falling, the trader treated the morning as a range day and stopped taking breakout entries.”
Detailed Explanation
ADX is built from two directional lines (+DI and -DI) that compare each bar's upward and downward extension, smoothed over a lookback that is usually 14 bars. A rising ADX means directional movement is strengthening; a falling ADX means it is fading. Common rules of thumb read ADX below 20 as a weak or absent trend and above 25 as a trend worth respecting, though those cut-offs are conventions, not laws.
Day traders use ADX mainly as a regime filter. A low and falling ADX supports range and mean-reversion setups and warns against breakout and trend entries. Because it is a smoothed average, ADX lags: it often confirms a range only after the range is already well formed, and it can stay low for a few bars after a real breakout starts.
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