Indicator
ADX (Average Directional Index)
ADX measures how directional recent movement has been, on a scale from 0 to 100. It is explicitly non-directional: a high reading occurs in sustained declines exactly as it does in sustained advances.
Smoothing length. Shorter reacts faster and is noisier.
Chart runs on a generated sample series, not live or historical exchange data. Values are computed with the same functions CernoQuant uses to run backtests.
How it is calculated
How to read it
- ADX alone carries no direction. The +DI and −DI lines are the components that indicate which side movement has been on.
- Readings below roughly 20 are conventionally described as non-directional and above roughly 25 as directional. These are convention, not tested thresholds.
- ADX rising means recent movement has been more one-sided than before, whichever way it went.
What it does not tell you
- It is built from smoothed averages of smoothed values, so it lags considerably. ADX confirms that movement has been directional well after it began.
- A high ADX describes what has already happened and frequently peaks near the end of a move rather than the start.
- Traders often read ADX as bullish. It is not capable of being bullish or bearish — that information sits in the DI lines.
Common settings
14 periods is Wilder’s original convention, with 20 and 25 the usual reference lines.
Frequently asked questions
What does ADX measure?
How one-sided recent movement has been, from 0 to 100. It measures the degree of directional movement without indicating which direction.
Does a high ADX mean the price is going up?
No. ADX is direction-neutral. A strong decline produces a high ADX just as a strong advance does. The +DI and −DI lines carry the directional information.
What ADX value indicates a trend?
Above 25 is the common convention, with below 20 described as non-directional. These figures are conventions in wide use rather than validated thresholds.
Why does ADX lag so much?
Because it is a smoothed average of a value that is itself derived from smoothed averages. Each layer of smoothing adds delay.
Related
- Average True Range (ATR) — Indicator
- Trend vs Range: Why Context Changes Everything — Concept
- Lagging vs Leading Indicators — Concept
Educational use only
This page is educational material about how a technical tool is calculated and read. It is not investment advice, not a recommendation to buy or sell anything, and not a signal service. No indicator predicts future prices. CernoQuant is a trading journal and analytics platform, not a SEBI-registered investment adviser. Trading decisions and their outcomes are yours alone.
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