Weekend Market School

Today's Lesson: ADX and trend strength

Hello friends, welcome to our weekend stock market school! Today we will learn an indicator that answers the question "is there a trend in the market or not?": ADX. Grab your coffee, let's get started.

1. What is it?

First, a simple analogy: When you're driving a car, you look at the speedometer. The speedometer tells you how fast how fast ; but it's going it does not tell. You can drive fast forward or backward.

ADX for the market is exactly this: It measures how much the price is moving in a stable and strong manner. It doesn't tell the direction.

Clear definition: ADX (Average Directional Index), "J. Welts Wilder developed indicator that shows the strength of a trend with a value between "0 and 100 . It is generally calculated with a 14 period. The nearby+DI and-DI lines also help with direction.

2. Why is it important?

• It reduces false signals: In sideways markets, trend indicators can be misleading. ADX answers the question "Is there really a trend here?".

• It helps you pick the right tool: In a strong trend, a trend-following approach is suitable; in weak ADX, support-resistance logic is more appropriate.

• It builds patience: It teaches you to "wait for confirmation" while ADX is below 25.

• It also sees declines: A strong downward movement also raises ADX. This is valuable information for risk management.

3. How to Read / Use?

Let’s go step by step:

1. Open the indicator: Add the ADX to the chart (default period 14).
2. Look at the level:

• 0 – 25: Weak zone; no trend or very weak (sideways market).

• 25 – 50: Strong trend. The most commonly used threshold in practice: Above 25: strong trend.

• 50 – 75: Very strong trend.

• Above 75: Extremely strong; the trend may be mature, even close to weakening.
  3. Watch the slope: Rising ADX means the trend is strengthening; falling ADX means it is weakening.
  4. For direction, look at the DI lines: ADX does not tell direction. When +DI is on top, buying pressure dominates; when -DI is on top, selling pressure dominates.
  5. Do not use it alone: Confirm with volume and price action.

Keep this in mind: " ADX measures strength, not direction."

4. Real Example

Let's look at a few names from our site's daily data:

• KRDMD: It is on the strong buy signal list. Last price 46.96 TL, daily 1.65% gain. Channel width 54%, r value 0.77. A high r means the move is consistent in a certain direction. The critical educational question: is ADX also above 25? If the answer is "yes", the strength aspect of the signal is confirmed too. If ADX is below 20, be cautious despite the label.

• DSTKF: Last price 1,174.00 TL, daily 9.97% loss; channel 26%, r -0.50. . The lesson here: a sharp drop can raise ADX over time; but ADX does not say it is downward , only that strength is increasing . Direction is shown by the price and the DI lines.

• PETKM: Last price 21.06 TL, daily 4.27% drop; but r 0.49, that is positive. Isn't it interesting? One day being red does not break the period's general consistency. ADX is the same way: It looks at the average of the period not one day.

• GUBRF: Last price 458.00 TL, daily 6.45% increase; channel 35%, r 0.51. A moderately positive consistency profile.

Did you see? r and ADX are like brothers: Both look at the period, not one day.

5. Common Mistakes

• " To say "ADX rose, buy signal!" ADX doesn't indicate direction; it indicates strength. For direction, look at +DI/-DI and price movement.

• Mistaking the 25 threshold as a trading signal by itself. ADX above 25 means "the trend is strong"; it does not mean "buy" or "sell".

• Drawing quick conclusions from a single-day spike. ADX is smoothed and lagging; a single bad day won't immediately drop it.

• Forcing a trend strategy in low ADX. Following trends in a sideways market generates constantly false signals.

6. Mini Test

Question 1: ADX is at 18 and moving sideways. What should you think about in this market?

Answer: Trend is weak or non-existent; market is sideways. Trend-following signals may not be reliable; support-resistance approach may be more appropriate.

Question 2: ADX is 42 and rising; +DI line is above -DI. What does it mean?

Answer: There is a strong uptrend. ADX strength, position of DI lines indicates direction.

Question 3: A stock fell 9.97% in a single day. Would ADX spike immediately and say "downtrend has begun"?

Answer: No. ADX is lagging; one day won't make it spike immediately. Even if it rises over time, it doesn't indicate direction; price and DI lines indicate the decline.

7. Summary

• ADX, the trend'snot the direction but the strength measures; gives a value between 0–100.

• above 25 is considered a strong trend, below is considered horizontal/weak market.

• For direction, look at the + DI / -DI lines and price.

• ADX is lagging; looks at the period, not single-day movements.

• In a strong trend, trend following; with weak ADX, support-resistance logic is more suitable.

This lesson is for educational purposes, not investment advice.