Introduction
In crypto trading, knowing whether the market is trending or ranging is crucial. The ADX (Average Directional Index) helps you do just that. This indicator line itself doesn’t show direction—only trend strength. Directional movement comes from the +DI and –DI lines—but it tells you the strength of a trend. In this blog, we’ll break down how this indicator works, how to interpret its signals, and how to use it on Pi42, India’s lowest-fee crypto futures platform.
What is the ADX indicator?
This indicator is part of the Directional Movement System developed by J. Welles Wilder. It’s a non-directional indicator, which means it measures trend strength, not trend direction.
This indicator’s line moves between 0 and 100:
- 0–20: Weak or no trend
- 20–25: Possible trend forming
- 25–50: Strong trend
- 50–75: Very strong trend
- 75–100: Extremely strong trend (rare)
This indicator is usually plotted along with two other lines:
- +DI (Positive Directional Indicator)
- –DI (Negative Directional Indicator)
These help spot trend direction, while this indicator line itself indicates how strong that trend is.
How to Use this indicator in Crypto Trading
1. Identifying Trend Strength
- Use this indicator’s value to determine whether to trend-follow or range-trade
2. Entry Signal with +DI and –DI
- If +DI crosses above –DI and ADX > 20 → Possible bullish trend
- If –DI crosses above +DI and ADX > 20 → Possible bearish trend
3. Confirming Breakouts
- When this indicator rises above 25 after a period of consolidation, it may confirm a breakout
How to Use this indicator on Pi42
Step 1: Log in to pi42.com and open a crypto futures chart
Step 2: Click “Indicators” and select “ADX” or “Average Directional Index”
Step 3: Apply default settings (typically 14-period) or customize per your timeframe
Step 4: Observe ADX, +DI, and –DI crossovers to gauge trend signals
Step 5: Combine with price action, RSI, or Parabolic SAR for better confirmation
Pi42 provides real-time charting tools and the lowest trading fees, perfect for testing trend-based strategies like ADX.
ADX-Based Trading Strategies
Strategy 1: Trend Confirmation
- Use ADX > 25 as a filter for trend-following trades
- Enter long when +DI > –DI, and ADX rising
- Enter short when –DI > +DI, and ADX rising
Strategy 2: Avoid Range-Bound Markets
- If this indicator < 20, avoid trend-based trades; consider mean-reversion setups instead
Strategy 3: ADX + RSI Combo
- Use RSI to time entries and this indicator to confirm the strength of the move
Limitations of this indicator
- No Directional Signal Alone: Needs +DI/–DI for context
- Lagging Indicator: Based on moving averages, so it reacts after a move starts
- Less Useful in Choppy Markets: May whipsaw during low-volume or sideways periods
Conclusion
This indicator is a reliable trend strength indicator that helps traders avoid sideways traps and focus on real momentum. When used alongside +DI/–DI and other tools like RSI or SAR, it adds strong confirmation to your crypto trades. This indicator-based strategy lives on Pi42 with the lowest trading fees and responsive charting tools.
FAQ
What is a good ADX value for trading?
Generally, values above 25 indicate a strong enough trend to consider entering a trade.
Can I use ADX for intraday trading?
Yes, this indicator works well across all timeframes, including 5-minute, 15-minute, and 1-hour charts—perfect for intraday crypto trades.
Should I use this indicator with other indicators?
Absolutely. This indicator is most effective when combined with direction or momentum tools like MACD, RSI, or trendlines.
How is ADX different from RSI?
RSI measures momentum and signals overbought/oversold conditions, while this indicator measures the strength of a trend—regardless of direction.
Is ADX suitable for beginners in crypto trading?
Yes, this indicator is beginner-friendly and straightforward to understand once you grasp the basics. It helps new traders identify when to trade trends and when to avoid choppy markets, reducing the chances of entering low-probability trades.