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Market Intelligence › Basic Terminologies
Strength, not direction — and that is its biggest use
Published by The Retail Trader · AUG 01, 2026 · Indicators
Most indicators try to tell direction. ADX is different — it only tells whether there is a trend at all, whether up or down.
ADX gives a number that shows the strength of the trend. A low value means a range, a high value means consistent movement in one direction.
Two more lines come with it that show direction, but ADX itself is direction neutral — it rises even in a falling trend.
Using ADX as a filter is the most practical:
• Turn on trend strategies only when ADX is reasonably high.
• Turn on range strategies only when it is low.
• A rising ADX means the trend is strengthening, a falling one means the trend is tiring.
• It is lagging — by the time it rises, part of the move has already gone.
The biggest improvement to any strategy often comes not from adding a new signal but from adding a filter. A rule for "when not to trade" saves more money than a rule for "when to trade".
This article is for educational purposes only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics are changed by the exchanges, SEBI and RBI from time to time, so verify every number yourself with your broker or the official source.