Technical & Chart AnalysisADXAverage Directional Index
ADX (Average Directional Index)
A Wilder indicator measuring trend strength on a 0 to 100 scale, without indicating trend direction.
What ADX (Average Directional Index) means
The Average Directional Index, another Wilder construction, measures the strength of a trend without saying anything about its direction. It is derived from two directional movement indicators: +DI, which tracks the portion of each period's movement that extended the high, and -DI, which tracks movement that extended the low, both normalised by the true range. ADX is a smoothed average of the absolute difference between +DI and -DI relative to their sum, conventionally over 14 periods, and it rises whenever one side dominates the other regardless of which side that is.
Convention treats readings above 25 as a trending market and readings below 20 as ranging or directionless, with a rising ADX signalling a strengthening trend and a falling ADX a decaying one. Direction comes from the DI lines: +DI above -DI implies an uptrend. Traders mainly use ADX as a regime filter, enabling trend systems when it is high and range or oscillator systems when it is low. Because it is doubly smoothed, ADX lags badly, and it can still be falling well after a new trend has already begun.
Worked example
On the EUR/USD four-hour chart the 14-period ADX rises from 17 to 32 while +DI at 28 sits above -DI at 15; a trend trader reads that as a strengthening uptrend and re-enables pullback entries.
Related terms
- TrendA sustained directional bias in price, conventionally defined by a sequence of higher highs and higher lows, or the reverse.
- Trend FollowingA strategy family that enters in the direction of an established move and holds while it persists, rather than predicting turns.
- ConsolidationA phase of sideways, low-range trading in which price pauses and volatility contracts before the next directional move.
- MomentumThe rate at which price is changing, used to judge whether a move is accelerating or losing force.
- WhipsawRapid back-and-forth price movement that repeatedly triggers entries and stops in both directions.
Frequently asked questions
What does ADX (Average Directional Index) mean in forex trading?
A Wilder indicator measuring trend strength on a 0 to 100 scale, without indicating trend direction.
How does ADX (Average Directional Index) work in practice?
Convention treats readings above 25 as a trending market and readings below 20 as ranging or directionless, with a rising ADX signalling a strengthening trend and a falling ADX a decaying one. Direction comes from the DI lines: +DI above -DI implies an uptrend. Traders mainly use ADX as a regime filter, enabling trend systems when it is high and range or oscillator systems when it is low. Because it is doubly smoothed, ADX lags badly, and it can still be falling well after a new trend has already begun.
What is an example of ADX (Average Directional Index)?
On the EUR/USD four-hour chart the 14-period ADX rises from 17 to 32 while +DI at 28 sits above -DI at 15; a trend trader reads that as a strengthening uptrend and re-enables pullback entries.
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