What is the ADX indicator?

The ADX indicator is used to determine the strength of a trend of a given stock or commodity in the open market. It might be used as a confirming indicator or help to give you early warning signals that a trend might be coming to an end.

This indicator bounces between the numbers 0 to 100. The higher the number is the stronger the trend. It is very important to realize that the number will hardly ever if ever come close to 100. In fact if this indicator is above 40, it is enough to consider the trend very strong.

If the indicator goes below 20 that indicate that the trend is most likely getting weak. This is a warning that a stock might stop trending and consolidate and trade sideways.

You should not use the indicator to give you buy and sell signals. It is intended only to show you how strong the current trend is. You should also realize that a high number on the ADX indicator does not mean the stock is heading up. It might signal a strong bullish trend or a strong bearish trend, which is why you should always look at price action first.