trend indicator
Average Directional Index (ADX)
ADX measures the strength of a trend (not its direction). Values range from 0 to 100, with readings above 25 indicating a strong trend. It is derived from the directional movement indicators +DI and -DI.
Formula
ADX = SMA(N) of DX where DX = 100 × |+DI - -DI| / (+DI + -DI) +DI and -DI are calculated from directional movement over N periods (default 14)
Common strategies
- Trend strength: ADX > 25 indicates a strong trend (use trend-following strategies); ADX < 20 suggests a ranging market (avoid trend strategies).
- DI crossover: +DI crossing above -DI is bullish; -DI crossing above +DI is bearish — confirmed by rising ADX.
- ADX rising: A rising ADX (regardless of value) signals strengthening trend momentum.
How CommonQuant uses it
CommonQuant pre-calculates ADX(14) along with +DI and -DI on all timeframes. DSL strategies can reference adx(), adx_plus_di(), and adx_minus_di() functions.
Frequently asked questions
Does ADX tell you trend direction?
No. ADX only measures trend strength. To determine direction, look at the +DI and -DI lines: +DI above -DI is bullish, -DI above +DI is bearish.
What is a good ADX threshold?
ADX > 25 is generally considered a strong trend. ADX < 20 indicates a weak or ranging market. Some traders use 20-25 as a transitional zone where trend is building.