Definition
The average directional index is a smoothed technical indicator intended to measure trend strength without identifying whether the trend points upward or downward.
In market context
ADX is derived from positive and negative directional movement, true range, and multiple smoothing steps over a selected lookback. A rising value describes increasing directional separation, while a falling value describes weakening separation rather than an automatic reversal. Thresholds such as 20 or 25 are conventions, and lag, gaps, parameter choices, and range-bound markets can produce late or misleading signals.
Risk context
ADX can remain elevated after momentum peaks and cannot determine the direction or profitability of a trade.
Source
Use the primary source for fuller regulatory or market context.