ADX indicator (Average Directional Index)

Reading the levels

• Below 20: weak trend or range — range tools work better.
• 20–25: a trend may be forming.
• 25–50: a strong trend.
• Above 50: a very strong, often late-stage trend.

+DI and −DI

ADX is built from two lines. +DI measures upward movement, −DI downward. When +DI is above −DI and ADX is rising, the uptrend is strengthening; the reverse for downtrends. ADX itself only rises or falls with strength.

How traders use it

As a filter: trend-following entries only when ADX is above 25, mean-reversion setups only when it is below 20. A falling ADX from a high level warns that a trend is losing steam even while price still rises.

On BRVX

An ADX filter helps decide whether a breakout on a BRVX market is likely to run or fade. Because BRVX stock perpetuals print candles on weekends, a 14-day ADX on a BRVX daily chart covers two calendar weeks, not nearly three as on an exchange chart.