ADX
Filter
Average Directional Index Filter (ADX)
Find stocks in strong trends, using the Average Directional Index (ADX), in real time, with Trade Ideas Streaming Alerts (Scanner) and Top Lists (Screeners). The Average Directional Index (ADX) quantifies trend strength, not direction, on a daily chart with 14-period smoothing. Values between 20 and 40 suggest a strengthening trend; above 40, a strong one.
See the cross when it happens, not on tomorrow’s chart.
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Seeing a strong-trend stock make its next move as it happens helps active traders. The Average Directional Index (ADX) filter value changes once a day, so Streaming Alerts apply it the moment each alert fires: you see only the stocks that pass it, while they are moving.
How Trade Ideas finds it: set the min value to 40 to see only stocks with a strong ADX. See Trade Ideas plans and pricing to run it live.
How the Average Directional Index filter works
The Average Directional Index (ADX) is a technical analysis indicator used to quantify the strength of a trend in the stock market. Here’s a brief explanation:
Components: The ADX is part of the Directional Movement System, which also includes the +DI (Positive Directional Indicator) and -DI (Negative Directional Indicator). The +DI and -DI help determine the direction of the trend, while the ADX measures the trend's strength.
Calculation: The ADX is a smoothed moving average of the expansion of the range between the +DI and -DI.
Reading the ADX:
- Values below 20 indicate a weak trend.
- Values between 20 and 40 suggest a strengthening trend.
- Values above 40 indicate a strong trend.
Trader tip
The direction of the trend is determined by the +DI and -DI. If +DI is above -DI, the market is considered to be in an uptrend, and vice versa. The ADX is valuable for traders looking to identify when a trend is strong enough to warrant trading strategies that capitalize on following the trend.
These look at a daily chart and use a 14 period smoothing factor.
Average Directional Index filter settings
The settings of each Trade Ideas filter are defined in the Window Specific Filters Tab located in the Configuration Window of your Alert or Top List (Screener) window.
Here is how to setup the filter in your configuration window:
- Set the min value to 40 to see only stocks with a strong ADX.
Using the Average Directional Index Filter
Several trading strategies can be employed with the Average Directional Index filter. Here are a few examples:
- Trend Confirmation Strategy: Use the ADX to confirm if the market is trending by waiting for it to rise above a threshold (commonly 20 or 25). This confirmation helps decide when to employ trend-following strategies, with the direction of the trend indicated by the +DI and -DI lines.
- Trend Strength Strategy: Gauge the strength of a trend by monitoring changes in the ADX. An increasing ADX suggests growing trend strength, which could indicate a good opportunity to enter or maintain positions. A declining ADX indicates weakening trend strength, potentially signaling a time to exit.
- Volatility Management: Adjust stop-loss orders based on the trend's strength as indicated by the ADX. In strong trends (high ADX), consider setting wider stop-losses to stay in the trade through normal market fluctuations. In weaker trends (low ADX), tighter stop-losses can help in managing risk more effectively.
Filters to combine with Average Directional Index
Alerts to pair with the Average Directional Index filter
Categories
FAQ
Which stocks have an ADX above 25?
Add the Average Directional Index filter (ADX) to a Trade Ideas Streaming Alerts or Top List (Screener) window. Set the min value to 40 to see only stocks with a strong ADX.
What is the Average Directional Index (ADX) filter?
The Average Directional Index (ADX) quantifies trend strength, not direction, on a daily chart with 14-period smoothing. Values between 20 and 40 suggest a strengthening trend; above 40, a strong one.
How do I find stocks in a strong trend?
Use the Average Directional Index filter (ADX) in Trade Ideas Streaming Alerts and Top Lists to find stocks in strong trends, using the Average Directional Index (ADX). The Average Directional Index (ADX) quantifies trend strength, not direction, on a daily chart with 14-period smoothing.