ADX (Average Directional Index)
The indicator that answers the question that comes before all others: is there a trend? Its +DI and -DI lines then reveal its direction.
The ADX (Average Directional Index) is the third major indicator J. Welles Wilder left us in 1978, alongside the RSI and the ATR. Its specificity: it does not say whether the market is going up or down, but whether it is trending, and how strongly. That is precious information, because most strategies only work well in a given market regime: trend following when the market is directional, mean reversion when it oscillates.
How it's calculated
The calculation starts from directional movements: on each candle, it measures how far the high exceeds the previous high (upward movement) and how far the low undercuts the previous low (downward movement). These movements, normalized by volatility (the ATR), yield two lines: +DI, buying pressure, and -DI, selling pressure. The ADX is then a smoothed average of the gap between +DI and -DI: the more durably one dominates the other, the higher the ADX climbs. The default period in Screener.Trading is 14 candles, Wilder's historical value.
The indicator therefore displays three lines: the ADX itself (trend strength, from 0 to 100) and the two directional lines +DI and -DI, all three usable separately in screener rules.
How to read it
- ADX below 20: no trend : the market is oscillating, and breakout or trend-following strategies suffer.
- ADX between 20 and 25: transition zone : a trend may be emerging.
- ADX above 25: established trend; above 40-50, a strong trend, sometimes nearing exhaustion.
- +DI above -DI: buying pressure dominates (uptrend); -DI above +DI: selling pressure dominates. +DI/-DI crossovers serve as directional signals.
Two important subtleties: a rising ADX during a decline signals a strengthening downtrend : a rising ADX never means rising prices. And because it is doubly smoothed, the ADX is slow: it confirms a trend already in place more than it detects one at birth.
In the screener
The ADX is a remarkable market-regime filter. Rule examples you can build in Screener.Trading: "ADX above 25 on D1" to screen only trending assets; "+DI above -DI on D1" to restrict to uptrends; conversely, "ADX below 20 on H4" to target ranging markets where a Bollinger Band mean-reversion strategy applies.
By combining timeframes, you can require a confirmed underlying trend (ADX above 25 on D1, +DI dominant) while looking for an H1 entry signal with the RSI or MACD. Automated scans re-run these rules at every candle close and alert you by e-mail.
Use the ADX as a filter rather than a trigger: an "ADX above 25" rule at the top of a screener immediately removes the trendless markets where most signals fail.
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- FeatureThe multi-indicator, multi-timeframe screenerCombine technical indicators, timeframes and comparison operators to keep only the assets that match your strategy exactly.
- FeatureThe backtesting tool built into your screenersBacktests built from your screeners: entries, exits, fees and full metrics to judge a strategy on numbers instead of gut feeling.
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- IndicatorATR (Average True Range)The reference indicator for measuring volatility: it tells you how much an asset moves per candle on average, saying nothing about direction.
- IndicatorSimple Moving Average (SMA)The oldest and most widely used trend indicator: an average of recent closes that smooths out market noise and acts as a dynamic reference line.
- IndicatorMACD (Moving Average Convergence Divergence)A momentum indicator built on two exponential moving averages: its crossovers and histogram measure the acceleration and exhaustion of trends.
- IndicatorRSI (Relative Strength Index)The most popular momentum oscillator: it bounds the strength of a move between 0 and 100 and flags overbought and oversold conditions.
- Glossary+DI (positive directional indicator)The +DI measures the strength of upward directional movement in Welles Wilder's ADX system, by relating bullish price extensions to volatility.
- Glossary−DI (negative directional indicator)The −DI measures the strength of downward directional movement in Welles Wilder's ADX system, by relating bearish price extensions to volatility.
- GlossaryTimeframeA timeframe is the duration each candle on a chart represents (from one minute to several months) and sets the horizon of the analysis.
- GuideBuilding your first screener, step by stepHow to turn a strategy idea into objective rules, pick the right asset universe, read scan results and iterate until you get a genuinely actionable list of opportunities.
- GuideBacktesting a trading strategy, step by stepBefore risking a cent, replay your strategy on historical data: backtest setup, reading the key metrics, and the traps of over-optimization.