What is ADX?
The Average Directional Index (ADX) measures how strong a trend is on a scale of 0 to 100, without saying whether the trend is up or down.
How it works
Wilder created it alongside the +DI and -DI lines, which compare the size of up-moves and down-moves. The ADX smooths the gap between them. Under about 20 is usually read as a range-bound market and above about 25 as a trending one, which is why it is often used as a filter before taking trend-following trades.
What it can't tell you
ADX rises as a trend strengthens and also falls as a strong trend matures, so a falling ADX is not a reversal signal by itself. It lags.
How Tickfloor uses it
ADX(14) is one of the ten inputs to Tickfloor's agreement score.
Does it work as a strategy?
Tickfloor backtested 1 rule that use the ADX, net of modelled trading costs, against a benchmark of the same assets. None finished ahead of the benchmark on the point estimate, and none cleared the corrected bar (Benjamini-Hochberg q below 0.10). These are specific tested implementations, not every way to use the ADX, and a historical diagnostic, not validation under Testing Standard v2.
Tickfloor's research desk has backtested 517 strategies, most against an equal-weight benchmark of the same assets rebalanced daily that pays no costs (the strategies pay theirs). After correcting for the 598 tests run (Benjamini-Hochberg), 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.
Common questions
What is ADX?
The Average Directional Index (ADX) measures how strong a trend is on a scale of 0 to 100, without saying whether the trend is up or down.
How does ADX work?
Wilder created it alongside the +DI and -DI lines, which compare the size of up-moves and down-moves. The ADX smooths the gap between them. Under about 20 is usually read as a range-bound market and above about 25 as a trending one, which is why it is often used as a filter before taking trend-following trades.
Does ADX work as a strategy?
Tickfloor backtested 1 rule that use the ADX, net of modelled trading costs, against a benchmark of the same assets. None finished ahead of the benchmark on the point estimate, and none cleared the corrected bar (Benjamini-Hochberg q below 0.10). These are specific tested implementations, not every way to use the ADX, and a historical diagnostic, not validation under Testing Standard v2.
What are the limits of ADX?
ADX rises as a trend strengthens and also falls as a strong trend matures, so a falling ADX is not a reversal signal by itself. It lags.
How does Tickfloor use ADX?
ADX(14) is one of the ten inputs to Tickfloor's agreement score.