What Is ADX (Average Directional Index) and What Does a Reading Above 25 Mean?

ADX, the Average Directional Index, measures how strong the current trend is on a 0-100 scale, without saying whether that trend is up or down. A rising ADX means price is moving with conviction in one direction; a low ADX means it is drifting sideways.

How it is calculated

ADX is built in three steps from daily high, low and close prices over 14 periods:

• Directional movement. For each day, compare today's high with yesterday's high and today's low with yesterday's low. If the high pushed further up than the low pushed down, that day counts as positive movement; if the low pushed further down, it counts as negative movement.
• Directional indicators. Smooth those positive and negative movements over 14 days and divide each by the average true range over the same window. This gives +DI (upward pressure) and -DI (downward pressure), both scaled to the stock's own volatility.
• ADX. Take the absolute difference between +DI and -DI, divide by their sum, and smooth the result over 14 days again. Because it uses the difference between the two, ADX rises whenever one side dominates, regardless of which.

Two smoothing passes mean ADX lags. It needs at least 28 bars of history before the first value is meaningful, and it reacts to a new trend a few days after the trend has begun.

Rules of thumb

ADX(14)	What it usually means
Below 20	Weak or absent trend; price mostly range-bound
20 to 25	Grey zone; a trend may be forming or fading
Above 25	Defined trend, up or down
Above 40	Very strong trend, often late in the move

These thresholds are conventions carried over from the indicator's original description. A stock can trend gently with ADX at 18, and ADX can stay high while price has already stopped making progress.

What it does not tell you

• Direction. ADX 35 could be a strong rally or a strong sell-off. To know which, you have to look at +DI versus -DI or at price itself.
• Turning points. A falling ADX means the trend is losing strength, not that it has reversed. Price often keeps going while ADX cools.
• What happens in a range. ADX below 20 says "no trend", which is exactly when breakout rules produce their worst false signals — and also when mean-reversion tools like RSI tend to behave better.

In Stock Compass

ADX(14) does not sit in the metric strip on the stock card, but it appears in the card verdict's price-momentum notes: 25 or above produces "there is a defined trend rather than choppy sideways action", below 20 produces "no clear trend, mostly range-bound". Both notes are neutral — a trend is a context, not a good or bad thing by itself.

ADX is a rule indicator under Trend & Momentum. Its id is adx_14, and the default condition is adx_14 > 25. Its most common job is as a filter: combined with a 20-day breakout and a volume ratio above 1.5, it drops breakouts that happen inside a range. The guide Using ADX to filter false breakouts shows that rule in full, with the trade-off it makes, and Turn your logic into buy rules covers the general mechanics.