ADX indicator and DMI: how to measure trend strength with +DI and −DI
What is the ADX indicator?
The ADX indicator (Average Directional Index) measures how strong a trend is, not which way it is going. It is part of J. Welles Wilder's Directional Movement Index (DMI), which has three lines: ADX, +DI and −DI.
ADX answers "is this market trending or ranging?" The two DI lines answer "who is pushing harder, buyers or sellers?" Together they make one of the most useful filters for deciding which other tools to trust. Trend tools like Supertrend and moving averages behave well when ADX is strong; oscillators like the stochastic behave better when ADX is weak.
−DM = Previous Low − Low (if larger than High − Previous High and positive, else 0)
+DI = 100 × Wilder-smoothed(+DM) ÷ ATR · −DI = 100 × Wilder-smoothed(−DM) ÷ ATR
DX = 100 × |+DI − −DI| ÷ (+DI + −DI) · ADX = Wilder-smoothed DX (default 14)
How ADX and DMI are calculated
Directional movement
Each candle compares today's high with yesterday's high, and today's low with yesterday's low. If the upward extension is bigger, that is +DM. If the downward extension is bigger, that is −DM. Only the larger one counts; the other is zero.
Directional indicators
+DM and −DM are smoothed with Wilder's method over 14 periods and divided by the ATR. This gives +DI and −DI as percentages of normal range.
ADX
DX is the gap between +DI and −DI divided by their sum. When one side dominates, DX is high. ADX is the smoothed DX, so it rises when one side keeps dominating and falls when they balance out.
Because of double smoothing, ADX is slow. It confirms a trend after it has started, which is exactly what a filter should do.
How to read ADX levels
| ADX reading | Common interpretation |
|---|---|
| Below 20 | Weak or no trend; range conditions |
| 20 to 25 | Trend may be developing |
| 25 to 40 | Established trend |
| Above 40 | Very strong, often extended trend |
The slope matters as much as the level. A rising ADX from 18 to 28 says a trend is building. A falling ADX from 45 to 35 says the trend is still present but losing strength, often before a pullback or a range.
Reading +DI and −DI
When +DI is above −DI, upward movement is dominating. When −DI is above +DI, downward movement is dominating. A crossover of the DI lines with ADX rising is the classic Wilder setup; a crossover with ADX below 20 is usually noise.
Best ADX settings for NIFTY intraday
The default 14 period for both DI and ADX smoothing is standard on all timeframes. On 5-minute NIFTY and BANKNIFTY it gives a readable picture of whether the session is trending.
- ADX 14 on 5-minute: general intraday filter.
- ADX 7 to 10: faster reaction; suits traders who want earlier trend detection but accept more noise.
- ADX 14 on 15-minute: a good higher-timeframe view for 5-minute entries.
Many intraday traders use 20 or 25 as their trend threshold. Pick one, write it down and stay consistent.
ADX strategy ideas (educational)
1. Choose the right tool for the day
When ADX is below 20 and flat, range tactics such as fading the edges of the CPR or previous day's range tend to suit the conditions. When ADX is above 25 and rising, trend tactics such as pullbacks to VWAP suit better.
2. DI crossover with ADX confirmation
A trader may study +DI crossing above −DI only when ADX is also rising above 20. That filters out many crossovers in choppy markets.
3. ADX turn-down as caution
When ADX peaks above 40 and turns down, a strong trend is losing momentum. Traders often tighten trailing stops rather than adding to the position.
4. Breakout confirmation
A breakout from a low-ADX range followed by ADX climbing above 20 within a few candles supports the idea that the move is a real breakout rather than a fakeout.
Combining ADX with volume and footprint
ADX tells you a trend exists; volume tells you whether participation supports it. A rising ADX together with rising OBV or a steadily rising cumulative delta shows buyers are both dominating range and committing volume.
On the footprint chart, a strong trend often shows stacked buying or selling imbalances on pullback candles. When ADX is high but the footprint shows absorption at the extremes, the trend may be nearing exhaustion.
Worked BANKNIFTY example (illustration)
Illustration with plausible numbers. BANKNIFTY opens flat at 51,800. For the first hour the 5-minute ADX(14) reads 14 and +DI and −DI cross back and forth as the index rotates in a 200-point range.
At 10:45 price breaks below 51,700 and −DI jumps above +DI. Over the next six candles ADX rises from 15 to 27. A trader using ADX as a filter would treat the move as a developing trend and look for pullbacks to the falling VWAP rather than fading the move. By 13:30 ADX reaches 42 and then turns down while price makes a marginal new low at 51,420, a warning that the selling pressure is fading. Trading F&O carries a high risk of loss; the example only shows how the readings evolve.
Common ADX mistakes
- Reading ADX as direction. A falling market can have a rising ADX.
- Acting on DI crossovers when ADX is below 20.
- Expecting ADX to catch tops and bottoms; it lags by design.
- Assuming high ADX means "join now". Above 40, trends are often extended.
- Ignoring the slope and only looking at the number.
- Stacking ADX with several other trend tools that all say the same thing, which adds confidence without adding information.
ADX vs Aroon and other trend-strength tools
Other indicators also try to measure trend strength, but ADX remains the most widely used because it combines direction (DI lines) and strength (ADX) in one panel. Whatever tool you choose, the purpose is the same: decide whether conditions favour trend-following or range trading before you look for a setup, and size the position with clear risk management rules.
Seeing it on the TradingMarble chart
The TradingMarble chart can show ADX with +DI and −DI in a lower pane, beside the footprint and volume profile. That lets you compare trend strength readings with actual buying and selling at each level during the session. See the features page.
ADX and DMI checklist
- Is ADX above or below your trend threshold?
- Is ADX rising or falling?
- Which DI line is on top?
- Do volume and delta agree with the dominant side?
- Am I using trend tools on a trend day and range tools on a range day?
The ADX indicator is less about entries and more about context: it tells you which game the market is playing today.
Frequently asked questions
What does ADX above 25 mean?
ADX above 25 is commonly read as an established trend. It does not tell you direction; for that, check whether +DI is above −DI (upward dominance) or below it (downward dominance). A rising ADX above 25 suggests the trend is strengthening, while a falling ADX suggests it is losing strength.
What is the difference between ADX and DMI?
DMI (Directional Movement Index) is the full system of three lines: +DI, −DI and ADX. +DI and −DI show upward and downward movement strength. ADX is derived from the difference between them and shows overall trend strength without direction. People often say ADX when they mean the whole DMI.
What is the best ADX setting for intraday trading?
The standard 14-period ADX works well on 5-minute and 15-minute NIFTY and BANKNIFTY charts. Some traders shorten it to 7 to 10 for faster reaction. A threshold of 20 or 25 is commonly used to separate trending from ranging conditions.
Can ADX show trend direction?
No. ADX only measures trend strength. It rises in strong up-trends and strong down-trends alike. Direction comes from the +DI and −DI lines or from price structure. That is why ADX is almost always read together with the DI lines.
Why is ADX slow?
ADX is smoothed twice: once when building +DI and −DI, and again when averaging DX into ADX. This makes it lag, but also makes it stable. It is designed as a filter to confirm trends, not to catch the exact turning point.
What does a falling ADX mean?
A falling ADX means the dominance of one side is weakening. Price may still be trending, but less forcefully, or it may be entering a range. Traders often treat a turn down from high ADX levels as a reason for caution rather than a reversal call.