This article has been translated from English to Gen Z Slang.
When you're out here trading, it's pretty clutch to get a vibe check on a trend's strength, no cap, whichever way it's goin'.
Now, if you're tryna evaluate the beefiness of a trend, the Average Directional Index is kinda the G.O.A.T. technical indicator for that.
So, the Average Directional Index, aka ADX for the homies, is just another kind of indicator that bops back and forth.
ADX does the cha-cha slide from 0 to 100. If it's under 20, that trend is weak sauce. But if it's flexin' over 50, it's got some serious energy.
Calculatin' ADX might feel like quantum physics, but TL;DR: the stronger the vibe, the higher the ADX shoots up.
When ADX is low-key chillin', it usually means the price ain't movin' much—it’s stuck on snooze.
But once ADX starts climbin' over 50, it means the price got its caffeine fix and is buckin’ in one direction.
Contrary to Stochastic, ADX ain't about picking sides—bullish or bearish. It just lets you know how much muscle the current trend's got.
That’s why ADX is the MVP for spotting if the market's on chill mode or starting a lit trend.ADX plays it cool, doesn’t pick sides. It's all about catchin' those high and low bar vibes, ignoring that close.
The stronger the trend, the juicer the reading, no matter if it's cruising up or down.
How to Use ADX
If you're doing your thing with the ADX indicator, peep those 20 and 40 numbers. They're the VIP sections.
Here's a cheat sheet so you'll know what's up with ADX values:
| ADX Value | Indication |
| Rising | Trend is living its best life |
| Falling | Trend's kinda sus |
| Below 20 | Trend's weak, bro |
| Between 20 and 40 | Trend's got some heat |
| Above 40 | Trend's totally fire |
Check these dope charts we've put together:
In this first example, ADX was all sleepy, hangin' below 20 from late September until early December.
If you peep the chart, EUR/CHF was totally vibin' in a range during that time.
But come January, ADX decided to turn up above 50, looking like a strong trend was 'bout to go ham.And sheesh! EUR/CHF dipped harder than your GPA, breaking that range with a solid downtrend. We’re talking like 400 pips, easy peasy.
Make it rain, baby!
Now, let’s see this next example:
Just like the previous jam, ADX was chillin' below 20 for a hot minute. EUR/CHF was also just hangin' in bounds.
Bam, ADX shoots up above 50, and EUR/CHF busts through the ceiling of the range.
Voila!
A lit uptrend steps up. That's about 300 pips, checked off like a to-do list!
Easy breezy, right?
If there's snag with ADX, it's that it's not a fortune teller—can't exactly tell you if it’s a buy or sell moment.But it does throw you a bone if the ongoing trend is lit enough to jump in or not.
As soon as ADX starts chillin' below 50 again, it might be signaling time to cash those gains before the trend fizzles.
How to Trade Using ADX
One dope way to roll with ADX is playing the waiting game for breakouts before shooting your shot—long or short.
ADX is like trusty sidekick vibes to confirm whether the pair is cruising through its current trend or hitting roadblocks.Another pro move is pairing ADX with another indicator, especially one that spills the deets on whether the pair's heats are goin' up or down.
ADX also comes in clutch for reading the room on when to dip out of a trade early.
Example: if ADX starts dippin' below 50, it's saying this trend's losing its juice.
From then on, the pair might vibe sideways, so snag those pips before it gets too chill.
As the saying goes, “The trend is your friend.”
Until it ghost you.
Oh wait.
I mean… “Until it switches up.”
(Lol moment caught me slippin', my bad.)
So next time you’re trying to suss out if the trend's doin' the ol’ switcharoo and you need to know if you should ghost it or lock in, give ADX a gander to see how much weight that trend is carrying.