ADX - Average Directional Index
Learn ADX for trend strength measurement. Understand DI+ and DI- components and how to identify strong trending markets.
What is ADX?
The Average Directional Index (ADX) was developed by J. Welles Wilder in 1978. Unlike most indicators, ADX doesn't show direction - it measures trend strength on a 0-100 scale.
ADX is typically shown with two additional lines: +DI (Directional Indicator Plus) and -DI (Directional Indicator Minus), which show direction.
ADX Levels
0-25
Weak/No Trend
Range trading
25-50
Strong Trend
Trade with trend
50-75
Very Strong
Stay in trade
75-100
Extreme
Possible exhaustion
+DI and -DI Lines
- +DI above -DI: Bullish pressure is stronger (uptrend)
- -DI above +DI: Bearish pressure is stronger (downtrend)
- DI Crossover: Potential trend change when they cross
GarudaAlgo Implementation
GarudaAlgo Enhancement
GarudaAlgo uses ADX to filter signals - we only take trend-following signals when ADX > 25, and switch to range-trading mode when ADX < 20. This significantly reduces false breakout trades.
What We Analyze
- ADX Value: Trend strength threshold
- ADX Direction: Rising ADX = strengthening trend
- DI Crossovers: +DI/-DI crosses for direction
- ADX Turning Points: Peaking ADX may signal exhaustion
Trading Strategies
Strategy 1: ADX Trend Filter
- ADX > 25: Use trend-following strategies (breakouts, pullbacks)
- ADX < 20: Use range-trading strategies (support/resistance bounces)
- Avoids applying wrong strategy to market condition
Strategy 2: DI Crossover with ADX Confirmation
- Wait for +DI to cross above -DI (bullish) or vice versa
- Confirm ADX is rising AND above 25
- Enter in direction of cross
- Exit when ADX peaks and turns down