Adx Calculator
Calculate the Average Directional Index to measure trend strength regardless of direction. Enter values for instant results with step-by-step formulas.
Formula
ADX = SMA(DX, n) where DX = |+DI - -DI| / (+DI + -DI) x 100
Where +DI = Smoothed +DM / ATR x 100 and -DI = Smoothed -DM / ATR x 100. Directional Movement (+DM/-DM) compares consecutive highs and lows. True Range normalizes the values. The DX is then smoothed using Wilder smoothing over n periods (typically 14) to produce the ADX.
Worked Examples
Example 1: ADX Trend Strength Assessment
Problem: A stock has ADX = 32, +DI = 28, -DI = 15. Determine trend strength and direction.
Solution: ADX = 32 > 25, indicating a strong trend is present\n+DI (28) > -DI (15), indicating bullish direction\nDI Difference = 28 - 15 = 13 points\nDI Sum = 28 + 15 = 43\nDX = (13 / 43) x 100 = 30.23\nSince ADX > 25 and +DI > -DI, this is a confirmed uptrend
Result: Strong Bullish Trend | ADX: 32 | +DI leads -DI by 13 points | Trend-following strategies recommended
Example 2: DI Crossover Signal with ADX Filter
Problem: +DI crosses above -DI. ADX was at 18 and is now rising to 22. Should you take the trade?
Solution: Step 1: +DI crossing above -DI = bullish crossover signal\nStep 2: ADX at 22 is below the 25 threshold for strong trends\nStep 3: However, ADX is RISING from 18 to 22, suggesting a new trend is emerging\nStep 4: Conservative approach: wait for ADX to exceed 25\nStep 5: Aggressive approach: enter with tight stop since ADX is rising
Result: Cautious Buy Signal | ADX rising but below 25 | Wait for confirmation or enter with tight stop
Frequently Asked Questions
What is the ADX indicator and what does it measure?
The Average Directional Index (ADX) is a technical analysis indicator developed by J. Welles Wilder Jr. that measures the strength of a trend regardless of its direction. It ranges from 0 to 100, where readings below 20 indicate a weak or non-trending market, readings between 25 and 50 suggest a strong trend, and readings above 50 indicate an extremely strong trend. The ADX does not indicate whether the trend is bullish or bearish, only how strong the current trend is. This makes it unique among technical indicators because most others focus on direction rather than strength. Traders use it to decide whether to employ trend-following or range-trading strategies.
What ADX reading indicates a strong tradeable trend?
Most technical analysts consider an ADX reading above 25 to indicate a strong enough trend for trend-following strategies to be profitable. Readings between 20 and 25 represent a transition zone where a new trend may be emerging or an existing trend may be weakening. Below 20, the market is generally considered to be ranging or consolidating, and trend-following strategies tend to produce whipsaws and false signals. Readings above 40 indicate a very strong trend, while above 50 is considered extremely strong and relatively rare. It is important to note that extremely high ADX readings above 50 often precede trend exhaustion, as such powerful moves are unsustainable for long periods.
How do you use ADX crossover signals for trading?
The primary ADX crossover signal occurs when the +DI line crosses above the -DI line, generating a bullish signal, or when -DI crosses above +DI, generating a bearish signal. However, these crossovers should only be traded when the ADX itself is above 20 or 25, confirming that a meaningful trend exists. A common strategy is to enter a long position when +DI crosses above -DI with ADX rising above 25, and exit when ADX begins declining or the DI lines cross back. Some traders also use the extreme point rule, where they note the extreme price on the day of the crossover and only enter if price exceeds that extreme in the following sessions.
What is the difference between ADX and other trend indicators?
Unlike moving averages or MACD which show trend direction, ADX exclusively measures trend strength without indicating whether the trend is up or down. Moving averages lag significantly and can produce false signals in choppy markets, while ADX helps traders avoid these situations by signaling when no trend exists. Compared to the RSI which measures momentum and overbought or oversold conditions, ADX measures directional movement strength. The Aroon indicator also measures trend strength but uses time since highs and lows rather than directional movement. ADX is often used in combination with these other indicators, providing a trend strength filter to improve the quality of signals generated by directional indicators.
What period length should I use for the ADX calculation?
The default and most widely used period for ADX is 14, as originally recommended by its creator Welles Wilder. This provides a good balance between responsiveness and smoothness for most timeframes and markets. Shorter periods like 7 or 10 make the ADX more responsive to recent price changes but also more prone to noise and false signals. Longer periods like 20 or 30 produce smoother readings but lag more and may miss the early stages of new trends. Day traders sometimes use shorter periods on intraday charts, while swing traders and position traders may use the standard 14 or longer. The optimal period also depends on the volatility of the instrument being traded.
How does ADX relate to the Average True Range (ATR)?
ADX and ATR are closely related because both were developed by Welles Wilder and both use the True Range in their calculations. The True Range is the foundation for calculating the +DI and -DI values, as directional movement is normalized by dividing by the ATR. While ATR measures the magnitude of price volatility in absolute terms, ADX measures the consistency of directional movement relative to that volatility. A market can have high ATR (large price swings) but low ADX (no consistent direction), indicating choppy volatile conditions. Conversely, a market can have moderate ATR but high ADX, meaning price is moving steadily in one direction without large swings.