ADX Indicator: Formula, +DI and −DI, and the 25 Trend Level

The Average Directional Index (ADX) measures how strong a price trend is, not which way it is going, on a scale of 0 to 100. It is built from two companion lines, +DI and −DI, which compare how far each day's range extended above the previous day's high and below the previous day's low. By convention, an ADX above about 25 is read as a strong trend and below about 20 as a weak trend or none.

ADX Formula

For each session, compared with the session before:

• Up move = high − prior high; down move = prior low − low
• +DM = the up move if it is larger than the down move and above 0, otherwise 0
• −DM = the down move if it is larger than the up move and above 0, otherwise 0
• True range = the largest of: high − low, |high − prior close|, |low − prior close|

Then, with Wilder smoothing over 14 sessions (start with the simple average of the first 14 values, then update as (13 × previous + today) / 14):

• +DI = 100 × smoothed +DM ÷ smoothed true range
• −DI = 100 × smoothed −DM ÷ smoothed true range
• DX = 100 × |+DI − −DI| ÷ (+DI + −DI)
• ADX = Wilder-smoothed 14-session average of DX

Some references smooth running sums instead of averages; the resulting DI and ADX values are the same, because the sums cancel in each ratio.

Illustrative example: with +DI at 30 and −DI at 10, DX = 100 × 20 ÷ 40 = 50.

How To Read ADX, +DI And −DI

• ADX level: higher means price has been extending consistently in one direction; lower means movement has been mixed. The 25 threshold is a convention, not a boundary.
• ADX direction: a rising ADX means the trend, up or down, has been getting stronger; a falling ADX means it has been fading.
• +DI vs −DI: +DI above −DI means upward range extension has dominated recently; −DI above +DI means downward extension has. A +DI/−DI crossover is a trading convention.

Because ADX smooths DX, which is itself built from smoothed values, it responds slowly and needs roughly 28 sessions of history before it can be computed.

How Vyreon Calculates It

• Wilder ADX(14), +DI(14) and −DI(14) on daily bars adjusted for splits and dividends, so a split does not appear as a huge downward range.
• Smoothing as described above; only sessions up to and including the reported day are used.
• Vyreon reports all three values; the trend-strength wording is labelled as a convention.

What ADX Does Not Tell You

• ADX alone gives no direction: a strong decline and a strong rise can both show a high ADX.
• It describes recent ranges. It does not forecast whether a trend continues.
• 20 and 25 are conventions, not rules.

Related: ATR · MACD · moving averages · Parabolic SAR · Ichimoku cloud

Sources

• J. Welles Wilder Jr., New Concepts in Technical Trading Systems (1978): the directional movement system (+DM, −DM, +DI, −DI, DX and ADX), true range and Wilder smoothing.
• John J. Murphy, Technical Analysis of the Financial Markets (New York Institute of Finance, 1999): general reference for momentum and trend indicators.

The 20 and 25 ADX levels are trading conventions; we know of no peer-reviewed source establishing them as thresholds.