Use ADX to Find Stronger Trade Setups and Avoid Getting Whipsawed by Weak Stock Trends

Barchart Insights Barchart Thu Sep 18, 3:40PM CDT
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Most traders focus on finding entries — but avoiding bad trades is just as important. That’s where the Average Directional Index (ADX) comes in.

In this clip from his recent live Barchart webinar, John Rowland, CMT, explains how ADX helps traders filter out non-directional markets and wait for higher-probability setups.

What Low ADX Means

John highlighted a Tesla (TSLA) example where price action looked compelling — but ADX told a different story:

  • ADX < 20 = non-directional market
  • Even if DI crossovers occur, they shouldn’t be traded until ADX rises
  • According to Welles Wilder, ADX under 20 means “no trade” on trend-following signals

This prevents traders from jumping into false breakouts or whipsaws.

When ADX Confirms a Trend

By contrast, John used Microsoft (MSFT) as an example:

  • ADX above 25 → confirms a strong uptrend
  • +DI line (green) above –DI line (red) → bullish momentum confirmed

The slope of ADX is important, too:

  • Rising slope = acceleration, fresh impulse of trend
  • Flattening slope = deceleration, possible exhaustion

Why It Matters

Without ADX, traders can get whipsawed by signals that look valid but form in weak or sideways markets. By filtering for ADX > 20 (emerging trend) or ADX > 25 (strong trend), you:

  • Avoid non-directional noise
  • Focus only on trades with higher conviction
  • Gain insights into trend acceleration or exhaustion
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Bottom Line

ADX isn’t just for spotting trends — it’s for filtering out directionless markets and choppy stocks. By waiting for ADX to cross 20 or 25, traders can sidestep weak markets and focus only on higher-probability moves.

Watch the clip where John Rowland explains how ADX reveals when to stay out:


On the date of publication, Barchart Insights did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.