ADX and Trend Strength
The Average Directional Index, or ADX, summarizes the strength of directional movement without directly specifying whether price is rising or falling. Direction is considered separately through +DI, −DI and the underlying chart.
How it works
Wilder’s system compares successive highs and lows to form positive and negative directional movement, smooths them relative to true range, then calculates DX=100×abs(+DI−−DI)/(+DI+−DI). ADX smooths DX. The exact seed and smoothing history affect early readings; full reproduction needs more than the last few bars.
Worked example
If +DI is 30 and −DI is 10, DX=100×20/40=50. If +DI is 10 and −DI is 30, DX is also 50. The direction is opposite but the separation is identical. ADX need not equal 50 immediately because it smooths a sequence of DX observations.
Amounts, prices and scenarios are fictional teaching examples. They exclude any effects not explicitly stated and are not trade recommendations.
Limits and common mistakes
Thresholds such as 20 or 25 are conventions rather than universal market laws. ADX can rise while a downtrend strengthens and remain high after price begins to turn. It does not prove that a trend-following strategy is profitable after costs.
Knowledge check
Does a rising ADX mean a bullish market?
Read the explanation
No. It can accompany either upward or downward directional movement. Direction and trend strength are different questions.
References and further reading
These sources explain the underlying concepts and specifications. They do not endorse QBMFX Academy. Check the relevant market, protocol version and reporting rules before applying an example.