ADX Indicator on a Live Gold Chart

What it shows

The ADX gets a pane of its own, scaled up from 0, with no guide lines drawn. The line only goes up or down; it carries no sign for direction.

How Pravex works it out

For each candle compare it with the one before. Up = today’s high − yesterday’s high; down = yesterday’s low − today’s low. The upward move (+DM) is the up value when it is bigger than the down value and above 0, otherwise 0. The downward move (−DM) is the mirror.
The candle’s true range is its full reach once a gap from the previous close is counted. +DM, −DM and that range are each given a Wilder average over the direction length, 14 candles.
+DI = 100 × smoothed +DM ÷ smoothed true range, and −DI the same with −DM.
Take |+DI − −DI| ÷ (+DI + −DI), using 1 as the divisor if the sum is 0. The ADX is 100 times a Wilder average of that ratio over the ADX averaging setting, 14 by default.

Settings

Setting	Default	What changing it does
ADX averaging	14	How many candles the final average covers, from 1 up to 50. A longer setting makes the ADX slower and smoother; a shorter one follows each push more closely.
Direction length	14	How many candles the directional moves and the true range are averaged over before the ratio is taken. This setting shapes how quickly the +DI and −DI behind the line react.

How traders read it

Traders use the ADX as a trend filter. A rising ADX says one side is gaining control, whichever side it is. A low or falling ADX says the moves are cancelling out and price is more likely drifting or ranging.

The usual yardstick is 25. Readings under it describe a weak trend and readings above it a firmer one. That cut-off is a habit, not a rule in the formula.

The direction lives in the +DI and −DI lines the ADX is built from. The DMI page on this site draws all three together.

When it misleads

The ADX is slow by design. It is a Wilder average of an average, so it turns well after the trend has turned, and a sharp reversal can leave it still rising for several candles. It also rises on a violent drop and on a violent rally alike, so a high reading on its own does not tell you which one you are looking at. In a tight gold range with a single spike candle it can briefly jump and then sag back.

Questions and answers

What does the ADX tell you?

How one-sided the recent up and down moves have been. A bigger number means one direction is dominating; a smaller one means the moves are roughly balanced. It never says which direction.

Is ADX above 25 a buy signal?

No. Above 25 is a common marker for a firmer trend, but the line has no direction, so it cannot say whether to buy or sell. Pair it with price, or with the +DI and −DI lines.

Why is the ADX rising while gold falls?

Because a strong fall is a strong trend too. The ADX only measures how far +DI and −DI have pulled apart, and in a steady sell-off −DI runs well ahead, so the ADX climbs. Check which DI is on top to see the direction.

Why does the ADX take so long to drop after a trend ends?

It is smoothed twice: the DI lines are Wilder averages over 14 candles, and the ADX is a Wilder average of their spread over another 14. Shorten the ADX averaging (both start at 14 in Pravex) and it drops sooner, with more wobble.