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Technical analysis

Average Directional Index

By Jarosław Wasiński • Published: • Updated:
An indicator of directional-movement strength derived from Welles Wilder’s system. ADX smooths the relative difference between +DI and −DI; it does not itself indicate direction. Readings of 20 and 25 are interpretive conventions, not certain trend boundaries or entry signals. Period, smoothing and initialisation affect the result.
Example. With assumed +DI = 30 and −DI = 10, DX = 100 × |30 − 10| / (30 + 10) = 50. If the previous Wilder ADX(14) is 25, the update is (13 × 25 + 50) / 14 ≈ 26.79. A reading of 26.79 is not a 26.79% probability of a rise.

DM, DI and DX

Successive bars compare the upward change in the high with the downward change in the low. Positive directional movement is assigned to the greater positive move in the relevant direction; tied moves set both DM values to zero under the classical convention. Then +DI = 100 × smoothed +DM / smoothed True Range, and −DI = 100 × smoothed −DM / smoothed True Range.

Smoothing and implementation

DX = 100 × |+DI − (−DI)| / (+DI + (−DI)), and ADX smooths DX. Classical Wilder smoothing uses a 1/n recursive weight after initialisation. Platforms can offer distinct ADX versions, so compare the method, starting history and data. A zero denominator needs an explicitly documented calculation convention.

Strength without a directional forecast

Levels of 20 and 25 are popular reference points, not proof of an edge or mandatory trend boundaries. Rising ADX can accompany falling or rising prices; falling ADX does not establish a reversal. An ADX filter changes the selected trades, so evaluate its impact after costs and outside the development sample.

Source of the definition

TradingView: ADX. Documentation of the construction or concept is not a guarantee of strategy results.

FAQ

Are ADX and DMI exactly the same?
No. DMI commonly includes +DI, −DI and ADX; ADX measures strength within that system. Check platform naming.
Does ADX above 25 mean buy?
No. It provides neither the direction nor a profitable trade’s probability.

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Jarosław Wasiński

Editor-in-chief, ForexMechanics.com • Macro & FX analyst

Independent analyst and practitioner with over 20 years of experience in financial markets. Actively involved in Forex since 2007, with a focus on fundamental analysis, OTC market structure, and disciplined capital risk management.

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