Average Directional Index
An indicator measuring the strength of a directional move on a scale of 0 to 100, without indicating its direction.
Formula
ADX = smoothed average of |+DI - -DI| / (+DI + -DI) x 100
Unit
ratio (x, times)
In depth
ADX is direction-blind by construction: a reading of 40 means a strong move is under way and says nothing about whether it is up or down, which is the single most misunderstood fact about it. Readings below 20 are conventionally read as no trend and above 25 as a trend present, thresholds that are convention rather than evidence. Its practical use is as a filter deciding which other tools are appropriate — trend-following rules in high readings, range rules in low ones. It is heavily smoothed and therefore lags substantially.
Worked example
ADX at 38 with +DI at 14 and -DI at 32 describes a strong move that is downward. ADX at 38 with those figures reversed describes an equally strong upward move — the ADX value alone cannot distinguish them.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Average Directional Index” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.