Average Directional Index

What is the Average Directional Index?

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ADX was created by J. Welles Wilder as the natural partner to DMI. Where DMI tells you the direction of a trend, ADX tells you how powerful that trend is — regardless of whether it's going up or down. Think of it like a speedometer for trends. A rising ADX means the current trend is picking up strength. A falling ADX means it's running out of steam. That distinction is huge in crypto, because the biggest opportunities come from riding strong trends — not wading through weak, uncertain ones.

How Does It Work?

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The ADX is a smoothed average of the DMI values over time. The bot watches the slope of the ADX line. When ADX is rising, the current trend is strengthening and the bot signals accordingly — reinforcing whatever direction the DMI is pointing. When ADX is falling, the trend is weakening. An ADX reading above 25 is commonly seen as a sign that a trend is worth trading.

Using It in BitThor

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Select Average Directional Index from the indicator list in your bot config. ADX works best alongside DMI: DMI identifies direction, ADX confirms the strength. Set your Indicator Factor weight based on how much you want trend strength to influence your bot's decisions. A moderate weight works well for confirmation.

Tips for Beginners

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• Use ADX as a trend strength filter. High ADX values mean a strong trend that's worth following.

• When ADX starts rising from a low level, it often signals the early stages of a new trend — a great entry opportunity.

• When ADX is falling, the market may be drifting sideways. Consider reducing position sizes or putting your bot on pause.

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Indicator by: J. Welles Wilder | Learn more