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An indicator that doesn't say whether a stock is rising or falling — only how strong the current trend is, in either direction.
ADX (Average Directional Index) ranges from 0 to 100 and measures the strength of the current trend — not its direction. A value below 20 usually indicates a range-bound market with no clear trend; a value above 25-30 indicates a strong trend, whether up or down.
Most indicators (RSI, MACD) try to hint at direction. ADX targets a completely different question: is there even a meaningful trend right now for other directional indicators to operate within more confidently. A low ADX means directional signals from other indicators are currently less reliable.
Investors relying on trend-following strategies often use ADX as a 'filter': ignoring buy/sell signals from other indicators when ADX is low (a trendless market, where such signals tend to be wrong more often), and weighting them more heavily when ADX is high.
ADX is part of roughly 23 indicators in the Technical Analysis category (25% of the score) — contributing context about how reliable the other directional indicators currently are, not a standalone signal.
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The information in this guide is intended for general educational purposes only and does not constitute investment advice. Full details on the disclaimer page.