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Identify Trend Strength Using the ADX Indicator

NinjaTrader features a myriad of pre-built trading indicators that can be used within the Chart, SuperDOM and Market Analyzer Windows. A popular indicator that is incorporated into many trading strategies is the Average Directional Index (ADX).

Developed by Wells Wilder in 1978, the ADX is designed to measure the strength of a prevailing trend by providing traders with a measurement of trend strength via a scale of 0 – 100. Many technical analysts agree that a low ADX value typically indicates a non-trending market, and high ADX values suggest the opposite.

In short, the ADX is calculated based on a moving average price range over a designated period of time. The following video tutorial demonstrates how NinjaTrader automatically includes two benchmark lines, an upper and lower, plotted at 75 and 25, respectively. Savvy technical analysis leverage said benchmarks to quickly determine and monitor the state of a trending or non-tending market.

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While popular due it its simplicity, a common misconception with the ADX is its non-directional nature. Meaning, if the ADX is falling it does not indicate that the trend is reversing, rather a falling ADX value typically indicates the trend strength is weakening, and may not be a forecast for market turning points.

Interested in learning more? Download NinjaTrader for FREE today and test drive any of the pre-installed Indicators!