Forex glossary
Average Directional Index (ADX)
Wilder's ADX smooths DX derived from +DI and −DI to describe directional strength on a 0–100 scale. It does not identify direction. A 14-period setting and 20/25 thresholds are conventions rather than universal boundaries between trends and ranges.
Illustrative example
How does it work in practice?
In a hypothetical calculation, +DI of 30 and −DI of 10 give DX of 50. Reversing those readings still gives 50; ADX smooths DX, so price direction must be assessed separately.
A case to work through
A stronger downward move
Hypothetically, ADX rises from 18 to 29, with +DI=12 and −DI=31.
- Rising ADX describes increasing measured strength rather than a positive price change.
- −DI above +DI indicates downward direction within the DMI system.
What follows? Describe stronger downward structure rather than an automatic buy signal.
Example boundary: ADX thresholds and calculation periods need defining; the reading can lag.
A useful distinction
Average Directional Index (ADX) / Average True Range (ATR)
ADX describes trend strength; ATR measures price ranges, including movement without a clear trend.
Check your understanding
Distinguish trend strength from direction.
Show the answer and explanation
Strength increases and DMI direction is downward
ADX and DI answer different questions.
Direction and strength tools
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Related terms
Sources and documentation
- StockCharts – ADX
ADX strength and directional DI components; strength is separate from direction.
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