Average Directional Index (ADX)

What is it?

ADX ranges from 0 to 100 and tells you HOW STRONG a trend is, regardless of whether it's up or down. ADX > 25 indicates a strong trend (good for trend-following strategies). ADX < 20 means the market is ranging/choppy (avoid trend strategies, use range strategies). ADX is derived from +DI and -DI lines.

Why it matters

ADX (weight 1.0) is SECONDARY in AIShare but plays a critical filtering role. It determines whether to trust trend signals. When ADX < 20, even perfect EMA/MACD signals may be unreliable because the market is choppy. ADX > 25 = green light for trend trades.

Formula

ADX = SMA(|+DI − −DI| / (+DI + −DI) × 100, 14)

Key parameters

How to use

1. 1ADX > 25 = Strong trend — use trend-following strategies (EMA, MACD)
2. 2ADX > 40 = Very strong trend — ride the trend aggressively
3. 3ADX < 20 = No trend / choppy — avoid trend strategies
4. 4Rising ADX = Trend strengthening — stay in position
5. 5Falling ADX = Trend weakening — tighten stops
6. 6ADX doesn't tell direction — use +DI/-DI or other indicators for that

Signals (5)

Swing trading tips

• Only take swing trades when ADX > 25 — otherwise the market chops you out
• ADX rising from below 20 to above 25 = new trend starting — early entry
• ADX peaking above 45 then declining = trend exhaustion — start taking profits
• Combine ADX with EMA: ADX > 25 + bullish EMA alignment = high conviction

Common mistakes to avoid

• Confusing ADX direction with price direction — ADX only measures strength
• Trading in choppy markets (ADX < 20) with trend strategies
• Waiting for ADX to get too high before entering — the move is already done

Video tutorials (3)

• ADX Indicator Explained — Trend Strength

  Trading Rush

• How to Use ADX for Better Entries

  Rayner Teo

• ADX Strategy — Filter Out Bad Trades

  The Trading Channel

Third-party tutorials — linked for educational reference. AIShare is not affiliated with these creators.

Quick quiz — test your ADX knowledge

5 questions. Pass with 3 out of 5 for a completion badge.

1. 1ADX measures…

   ATrend direction (up vs down)BTrend strength (regardless of direction)CVolumeDVolatility

2. 2ADX above 25 usually suggests…

   AA ranging marketBAn active, trending marketCNo dataDOver-bought conditions

3. 3ADX below 20 implies…

   AStrong trendBA choppy/ranging market where trend signals are less reliableCGuaranteed reversalDHigh liquidity

4. 4If ADX is rising sharply from 15 to 28, it hints at…

   ATrend exhaustionBA new trend developingCA data errorDNothing actionable

5. 5Which pairing makes sense for filtering?

   AUse ADX alone, ignore directionBUse ADX with EMA alignment — only take trend trades when ADX > 25CUse ADX only during earningsDAvoid ADX in swing trading

Educational self-assessment only — not a regulated qualification.