ADX / DMI (Average Directional Index / Directional Movement)

A trend-strength gauge with two directional lines, built to measure how strong a move is rather than which way it goes.

What it is

ADX/DMI is a single indicator family developed by J. Welles Wilder. It has three lines: +DI (positive directional indicator) and -DI (negative directional indicator), which together form the DMI, plus the ADX line, which is derived from them. The DI lines describe the direction of price movement, while ADX measures the strength of the trend regardless of direction. The most common lookback is 14 periods. ADX is plotted on a 0-100 scale (in practice it rarely climbs very high). It is educational and descriptive only, not a buy or sell signal, and like every indicator it is not predictive.

How it works

Wilder first measures "directional movement" each bar by comparing today's high and low to the previous bar's high and low. If price extends further up than down, that bar contributes to +DM; if it extends further down than up, it contributes to -DM. These raw values are smoothed over the lookback period and divided by the Average True Range (ATR) to produce +DI and -DI as normalized percentages, so they can be compared across instruments. ADX is then built from the gap between the DI lines: each bar's DX equals the absolute difference between +DI and -DI divided by their sum (times 100), so DX measures how lopsided the two lines are. ADX is the smoothed average of DX over the lookback. A large, persistent gap between +DI and -DI keeps DX and therefore ADX high (a strong trend), while DI lines that stay close together keep ADX low (a weak or sideways market). Crucially, ADX rises whether the trend is up or down, because it reflects the size of the gap, not its sign.

How traders read it

• Traders often read a rising ADX as a sign the current move is gaining strength, and a falling ADX as the move losing steam, regardless of direction.
• A common rough convention treats ADX below about 20-25 as a weak or non-trending (range-bound) market and above 25 as a trending market, but these thresholds are arbitrary guidelines, not hard rules.
• The DI lines are usually read for direction: +DI above -DI is often described as upward movement being more dominant, and -DI above +DI as downward movement being more dominant.
• Crossovers of +DI and -DI are sometimes watched as a change in directional balance, though many traders only pay attention to them when ADX is already elevated.
• Because ADX ignores direction, a high ADX value alone says nothing about whether price is rising or falling; traders pair it with the DI lines or price itself to add context.
• No indicator predicts price, and ADX/DMI describes past and current behavior only; all trading carries the risk of loss.

Common settings

Default lookback is 14 periods for both the DI calculation and the ADX smoothing, as in Wilder's original work. Some traders shorten it (e.g. 7-10) for faster, noisier readings or lengthen it (e.g. 20-30) for smoother, slower ones. The 20 and 25 levels are the most cited reference thresholds, but they are conventions you can adjust per market and timeframe.

Strengths

• Separates trend strength from trend direction, which few single indicators do, giving a quick read on whether a move has conviction.
• Normalized by ATR, so +DI and -DI are comparable across different instruments and price levels.
• Built in to most charting platforms (including a native ta.dmi() function in Pine v6), so it is easy to apply consistently.
• Can act as a context filter: some traders use a low ADX to flag range-bound conditions where trend-following approaches have historically struggled.

Pitfalls to watch

• ADX is a lagging, double-smoothed indicator. It reacts slowly and often confirms a trend well after it has begun, so signals can arrive late.
• ADX measures strength, not direction. A high reading during a strong downtrend looks the same as one during a strong uptrend, which can mislead anyone who treats a rising ADX as inherently bullish.
• DI crossovers can produce frequent false or whipsaw signals in choppy, low-ADX conditions, where price is range-bound and direction flips often.
• Threshold levels like 20 or 25 are conventions, not fixed truths. Suitable levels vary by instrument, timeframe, and volatility, and over-fitting them to past data is a common mistake.
• The standard ADX/DMI does not repaint, but using it on lower timeframes or with very short lookbacks amplifies noise and the chance of misleading readings.

Pine v6 example

//@version=6
indicator("ADX / DMI", overlay = false)

length = input.int(14, "DI Length", minval = 1)
adxLength = input.int(14, "ADX Smoothing", minval = 1)

[diPlus, diMinus, adx] = ta.dmi(length, adxLength)

plot(diPlus, "+DI", color = color.teal)
plot(diMinus, "-DI", color = color.red)
plot(adx, "ADX", color = color.orange, linewidth = 2)
hline(25, "Reference level", color = color.gray, linestyle = hline.style_dashed)

Pro tip: Read ADX and the DI lines together rather than in isolation: ADX describes whether a trend is strong enough to be worth watching, while the +DI/-DI relationship describes which side currently dominates. A rising ADX with a clear DI separation is the situation many traders find most informative, but this is interpretation for study, not a signal to act on, and no indicator can predict what price does next.

Educational only — not financial advice, not a recommendation to trade. No indicator is predictive; trading involves substantial risk of loss.