DMI/ADX Basics: Reading Trend Direction and Strength Separately
In this chapter we focus on DMI (Directional Movement Index)
and ADX (Average Directional Index).
Rather than “a crossover means buy/sell,”
we treat them as tools to answer:
“Is the market trending or ranging,
and if trending, in which direction and how strongly?”
Within trend, DMI/ADX acts as:
- a filter for trend vs range conditions, and
- in strategy, a way to choose between
trend-following and range-based approaches.
The diagram below shows:
- price and ma on top,
- +DI, -DI, and ADX underneath,
highlighting:
- which side (+DI or -DI) is in control,
- when ADX rises into strong-trend territory,
- and how ADX flattens during choppy ranges.
1. DMI/ADX Structure: +DI, -DI, ADX
DMI/ADX is built from three lines:
-
+DI (Positive Directional Indicator)
- measures the size of upward directional movement
over a recent window, - higher values → more genuine upward push.
- measures the size of upward directional movement
-
-DI (Negative Directional Indicator)
- measures downward directional movement,
- higher values → more genuine downward push.
-
ADX (Average Directional Index)
- distills trend strength only (no direction),
- high ADX → strong directional movement (up or down),
- low ADX → likely range or noisy environment.
Key idea:
+DI vs -DI → directional bias
ADX → how trending or non-trending the environment is.
2. Reading Direction with +DI and -DI
2-1. Basic directional bias
Simplest interpretation:
- +DI > -DI
→ recent action favors upward movement. - -DI > +DI
→ recent action favors downward movement.
Combined with:
- candles, and
- higher-timeframe structure from timeframes,
this helps you see whether:
- higher highs and higher lows + +DI dominance
→ bullish trend regime, - lower highs and lower lows + -DI dominance
→ bearish trend regime.
2-2. +DI/-DI crossovers
Commonly used:
- +DI crossing above -DI → potential shift toward bullish control,
- -DI crossing above +DI → potential shift toward bearish control.
On their own, these crossovers are fragile:
- in ranges, +DI and -DI cross frequently,
- without ADX and s-r context,
you tend to get chopped.
Think of DI crossovers as
“directional hints”, not full trading systems.
The diagram below compares:
- left: a trending environment with stable +DI dominance,
- right: a choppy range where +DI and -DI
cross many times without sustained direction.
3. ADX: Trend Strength, Not Direction
ADX is directionless:
- it rises when price moves directionally (up or down) in a sustained way,
- it stays low or falls when price is mean-reverting or choppy.
3-1. Typical ADX interpretation
Exact thresholds vary across markets and timeframes, but in practice:
- very low ADX → environment likely non-trending / range-like,
- rising ADX from low levels → a trend may be emerging,
- high ADX rolling over → possible late-trend / exhaustion.
The actual numbers (20, 25, 30, etc.)
should be treated as guidelines, not laws.
It’s worth back-checking on your own market:
“At which ADX levels did real sustained moves
actually occur in the past?”
The diagram below shows:
- top: price cycling through uptrend → range → downtrend,
- bottom: ADX rising and staying elevated in trend phases,
then fading and flattening during the range.
4. Using DMI/ADX as a Trend Filter
In practice, traders often:
- use ADX to decide “trend vs range,” then
- within that regime, combine +DI/-DI with
price structure and patterns.
4-1. Example trend filter logic
Conceptually:
- when ADX is above some threshold and rising,
you favor trend-following strategies from strategy. - when ADX is low and flat or falling,
you favor range/reversal strategies, such as: double-top-bottom
and other range-bound setups.
4-2. Combining with direction and entries
Example bullish context:
- ADX rising,
- +DI above -DI,
- price pulling back into support from s-r,
- with a reversal pattern from candles,
can be read as:
“trend strength returning after a pullback
into a structural support zone.”
Bearish examples are symmetric with -DI dominance,
resistance zones, and bearish patterns.
5. Breakouts, Failures, and DMI/ADX
In chart we discuss:
- triangles,
- wedges,
- double tops/bottoms,
- head and shoulders,
and other structures that often lead into breakouts.
DMI/ADX helps evaluate whether those breakouts are likely to:
- carry into a sustained trend, or
- fizzle into failure type moves.
5-1. Breakouts with “real” strength
Often seen when:
- a triangle or range breaks,
- ADX starts to lift from low levels,
- +DI/-DI clearly favor the breakout direction.
These conditions suggest:
“This is more than a one-bar spike;
a genuine trend leg may be starting.”
5-2. Breakouts without strength
Conversely, if:
- price pokes above/below a range boundary, s-r
- ADX remains low and shows no real upturn,
- DI dominance flips back and forth quickly,
such moves are frequent candidates for
fakeouts or failed breakouts.
6. Common Mistakes with DMI/ADX
-
Treating ADX levels as hard rules
- “ADX above 25 = trend, below 25 = no trend”
is too rigid for real markets. - Always sanity-check against historical charts
on your specific asset and timeframe.
- “ADX above 25 = trend, below 25 = no trend”
-
Ignoring price and patterns
-
Using DI crossovers as standalone entry signals
- In ranges, DI lines cross constantly.
- Without ADX direction and context from
s-r and patterns,
you risk overtrading noise.
-
Applying the same interpretation across all timeframes
- “High ADX” on a 5-minute chart tells a different story
than “high ADX” on a daily chart. - Tie your interpretation back to
timeframes and your trading style
(scalping, swing, position).
- “High ADX” on a 5-minute chart tells a different story
7. Practical DMI/ADX Checklist
With DMI/ADX on your chart, ask:
-
Is ADX low, medium, or high right now?
- trending or ranging environment?
-
Is ADX rising, flat, or falling?
- trend emerging, persisting, or losing steam?
-
Who is in control, +DI or -DI?
- and does that align with
ma and
your higher-timeframe structure?
- and does that align with
-
Did the latest DI crossover occur near a key level,
from s-r,
or in the middle of nowhere? -
If I trade based on this information,
do my stop, target, and size respect
risk-management?
DMI/ADX works best when used together with:
not as competition but as different lenses:
MA for direction and structure,
MACD for momentum and divergence,
Ichimoku for balance and projected zones,
DMI/ADX for trend strength vs range.
Combine them with price, patterns,
and disciplined risk management—
not as signal machines, but as
structured summaries of market behavior.