ADX in trading

The average directional index (ADX) is a technical indicator used by traders to determine the strength of a financial security's price trend. It helps them reduce risk and increase profit potential by trading in the direction of a strong trend.


There are far too many fake breakouts that can leave traders trapped in a bad trade position. The ADX helps validate breakouts. That is, when the price breaks out with an ADX reading of above 25, it implies that momentum in the new direction can be sustained.