ADX (Average Directional Index)

A trend-strength indicator that measures how strong or weak a trend is, regardless of direction. Useful as a strategy filter.

ADX indicator applied to the US30 15-minute chart showing trend strength readings — ADX (14) applied to the US30 15-minute chart. Readings above 25 confirm strong directional movement, while readings below 20 indicate a weak or range-bound market.

ADX is different from most trend indicators because it does not tell you direction; it tells you whether a trend is strong enough to matter. A commonly used setting is 14 periods. Readings below roughly 20 often indicate a weak or range-bound market, while readings above 25 suggest a stronger trend; some educational references also highlight 40+ as very strong.

That makes ADX an excellent strategy filter. A breakout strategy usually performs better when volatility is expanding and directional strength is present, so an ADX filter can help avoid taking breakouts in dead markets. Likewise, a mean-reversion strategy may work better when ADX is low and price is oscillating rather than trending. In practice, ADX is often more useful as a "should I even use this strategy here?" tool than as an entry signal.