ADX (Average Directional Index)
ADX measures trend strength on a scale from 0 to 100. It doesn't show direction, just how strong the current trend is. Above 25 = trending. Below 25 = ranging.
Understanding the Concept
ADX helps you avoid getting chopped up in sideways markets. When ADX is below 25, trend-following strategies fail—range strategies work better. When ADX is above 25 and rising, the trend is gaining momentum. Above 50 is a very strong trend. The ADX system includes +DI and -DI lines that show direction: +DI above -DI = bullish, and vice versa. The indicator lags (like all trend indicators), but it's excellent for confirming you're in a tradeable trend rather than noise.
Real-World Example
Bitcoin's ADX rises from 20 to 35 as price breaks out above resistance. The rising ADX confirms this is a real breakout, not a fakeout. You hold your long position with confidence.
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