Lesson 21 of 28
Trend strength: ADX, DMI and Aroon
Many tools work well in trending markets and fail in ranges, and vice versa. So before choosing a method, it helps to know whether there is a trend at all, and how strong it is. ADX, DMI and Aroon were designed to answer exactly that question.
DMI and ADX
The Directional Movement Index (DMI) has two lines: +DI, which measures the strength of upward moves, and −DI, which measures the strength of downward moves. When +DI is above −DI, upward pressure dominates, and the reverse.
ADX is derived from these two lines but does not show direction; it only measures trend strength. A high ADX can appear in a strong uptrend or a strong downtrend. The usual period is 14, and common interpretations are:
| ADX value | Common reading |
|---|---|
| Below 20 | Weak trend or ranging market |
| 20 to 25 | Unclear zone; a trend may be forming |
| Above 25 | A meaningful trend |
These thresholds are conventions, not laws. The slope of ADX also matters: a rising ADX means the trend is strengthening, while a falling ADX means trend strength is fading, even if price is still moving the same way.
The Aroon indicator
Aroon asks how many candles have passed since the latest high and the latest low within a given window, commonly 25 periods. It has two lines, Aroon Up and Aroon Down, both ranging from 0 to 100. If a new high was made very recently, Aroon Up is near 100. When Aroon Up is high and Aroon Down is low, an uptrend is fresh; when both are low, the market is probably trendless.
How to use these tools
Their main role is filtering, not generating entry signals. For example, a trader might lean on mean-reversion tools such as oscillators when ADX is low, and on trend-following tools when ADX is high and rising. These indicators lag too, and may confirm a new trend only after it is well under way.
Key takeaways
- ADX measures trend strength, not direction.
- +DI and −DI show which side of the market is dominant.
- Aroon measures how recent the latest highs and lows are.
- These tools are best used to pick a method that suits current conditions.
This lesson is for education only and is not a recommendation to buy or sell any asset.