TL;DR
- ADX measures how big, not which way. On SPY, days with ADX under 15 went on to touch +1% 78% of the time and -1% 70% of the time. In the 30-40 band, both rose together — 89% and 76%. The range widens on both sides at once.
- The direction half is backwards on index products. A bearish DI reading was followed by a higher average 5-day return than a bullish one — 0.232% versus 0.174% on SPY, and 0.198% versus 0.134% on ES.
- The strongest region in the entire SPY grid was long inside a bearish DI reading at ADX of at least 40: 10 reliable variants, 100% of them profitable, median return-to-drawdown 0.21.
- The short side does not work at any ADX level. 22 of SPY's 24 short regions were weak, and 20 of ES's 21. Of the 18 strongest regions, 17 were long.
- As a filter, it earns its keep — modestly. Requiring a minimum ADX of 25 before going long lifted the median return-to-drawdown from 0.01 to 0.04 on SPY and 0.01 to 0.03 on ES.
Everyone repeats the same three rules, and nobody publishes the numbers
You already know the rules. ADX above 25 means a strong trend worth following. ADX below 20 means a range, so stand aside or fade it. And when you need to know which way, look at whether +DI is above -DI.
Three rules, repeated in every tutorial and on every broker's education page. I have never once seen anybody publish the forward returns behind them.
So I measured them. Every bar in the history, labelled by its ADX state, with the outcome of the next 20 bars attached. Not a curated set of good-looking examples — the whole record, including the boring parts.
Think of ADX as a speedometer. It tells you how fast the market is travelling. It tells you nothing whatsoever about the road ahead, and the compass bolted to the side of it — the DI pair — turns out to be wired backwards.
How we tested
Two instruments, because one is never enough to trust a result. SPY daily bars from March 1993 to June 2026, which is 8,370 measured days. E-mini S&P 500 futures from February 2007 to July 2026, another 4,889 days.
ADX(14) throughout — Wilder's own default, and the one every platform ships. I did not sweep the indicator's length. The sweep went where the folklore actually makes its claims: the threshold. Six buckets, at under 15, 15-20, 20-25, 25-30, 30-40 and 40-plus, so the two famous lines at 20 and 25 sit in the middle with brackets on either side. If something special happens at 25, this grid would show a step there.
Five families were tested. Every bar, which isolates the ADX level on its own. The two held DI states, bullish and bearish. And the two DI crossovers, which is Wilder's own entry signal. Both trade directions were swept separately across all of them, along with fixed holds of 0, 1, 2, 3, 5, 10 and 20 bars — 3,780 variants per instrument.
The signal is read at the prior bar's close and filled at the next open. That one-bar gap is what makes every number below tradable rather than theoretical. Results are frictionless — no commission, no slippage — and cells with fewer than 50 trades are flagged rather than dropped. On SPY, 1,954 of the 3,780 variants clear that bar; on ES, 1,380.
If you have never had the indicator on a chart, here is what it looks like. Price on top, ADX and the DI pair underneath, with every stretch the indicator calls a downtrend shaded.
Finding 1: What does a high ADX actually predict?
It predicts a wider move. In both directions, at the same time.
For every event I recorded whether price later touched +1% and whether it touched -1%, within a 20-bar window. If ADX carried directional information, the up-touch rate should climb while the down-touch rate falls. That is not what happens.
| ADX bucket | SPY days | Touched +1% | Touched −1% |
|---|---|---|---|
| Under 15 | 1,427 | 78% | 70% |
| 15–20 | 2,109 | 81% | 74% |
| 20–25 | 1,933 | 85% | 73% |
| 25–30 | 1,387 | 86% | 73% |
| 30–40 | 1,203 | 89% | 76% |
| 40+ | 311 | 88% | 73% |
ES says the same thing, more sharply. Under an ADX of 15, the touch rates are 74% and 62%. At 40 and above they are 81% and 83% — and note that at the top of the range on futures, the downside touch rate overtakes the upside.
A high ADX is a volatility forecast, then. Expect a bigger move and size for it. Which side to be on is a question the indicator never answers.
Finding 2: Does a higher ADX mean higher returns?
On average yes, and the effect is real on both instruments. But almost all of it lives in a band you will rarely see.
| ADX bucket | SPY days | Avg 1-day | Avg 5-day |
|---|---|---|---|
| Under 15 | 1,427 | 0.003% | 0.036% |
| 15–20 | 2,109 | 0.005% | 0.127% |
| 20–25 | 1,933 | 0.030% | 0.223% |
| 25–30 | 1,387 | 0.077% | 0.183% |
| 30–40 | 1,203 | 0.054% | 0.288% |
| 40+ | 311 | 0.445% | 1.048% |
ES follows the same shape: 0.031% and 0.123% in the bottom bucket, rising to 0.220% and 0.746% at 40-plus.
Now the catch, and it belongs right next to the number rather than in a footnote. That 40-plus bucket is 311 days out of 8,370 on SPY, or 3.7% of the record. On ES it is 127 days out of 4,889, or 2.6%. It carries the largest returns in the study and the smallest sample in it. Build a plan around the top row of that table and you are building around something that shows up a dozen times a year.
Notice also what is missing: any step at 20 or 25. The curve rises gradually straight through both famous lines. The thresholds everybody quotes are not where the data changes behaviour.
Finding 3: Does the +DI/−DI pair tell you which way?
No. On both instruments it points the wrong way.
This is the result I did not expect, and I checked it twice before believing it. The DI pair is the half of the system that exists purely to supply direction. Here is what follows each state.
| Instrument | DI state | Days | Avg 1-day | Avg 5-day |
|---|---|---|---|---|
| SPY | Bearish (−DI > +DI) | 3,799 | 0.050% | 0.232% |
| SPY | Bullish (+DI > −DI) | 4,571 | 0.042% | 0.174% |
| ES | Bearish (−DI > +DI) | 2,178 | 0.058% | 0.198% |
| ES | Bullish (+DI > −DI) | 2,711 | 0.034% | 0.134% |
Four comparisons, four times the bearish reading wins. When the indicator says downtrend, the index goes on to do better than when it says uptrend.
The backtest grid agrees with the event data. The single strongest region in the entire SPY sweep was long inside a bearish DI reading at ADX of at least 40 — 10 reliable variants, 100% of them profitable, a median return-to-drawdown of 0.21. Buying while the indicator shouts downtrend was the best-scoring corner of 3,780 variants.
This is not mystical. It is what mean reversion looks like on an equity index. Sustained downward directional movement in the S&P 500 has been, for thirty-three years, a reason to buy rather than to sell. The DI pair measures that movement accurately and then labels it with exactly the wrong instruction.
One boundary on this claim: it is an index result. I tested SPY and ES, both proxies for the same underlying market. Nothing here says the DI pair is backwards on crude oil, on the euro, or on a single stock, and I would not assume it without running them.
Finding 4: Does ADX work on the short side?
Almost never. This one is not close.
The grid splits into stable regions — combinations of family, direction and ADX threshold — each rated on what share of its reliable variants made money. SPY produced 48 such regions, evenly split between long and short.
| SPY | ES | |
|---|---|---|
| Stable regions | 48 | 42 |
| Short regions rated weak | 22 of 24 | 20 of 21 |
| Strong regions that are long | 17 of 18 | 12 of 13 |
The exceptions are worth naming, because hiding them would be the kind of tidy story this study exists to avoid. On SPY, shorting a bullish DI reading at ADX of at least 40 was strong — 12 variants, 83% profitable — and shorting a bearish reading in the 15-20 band was moderate at 63%. On ES, one short region survived: the downward DI crossover with no ADX floor, 11 variants at 91% profitable.
Set against that, the cleanest illustration of the pattern: shorting a bearish DI reading at ADX 40 or above on SPY — the textbook "strong downtrend, go short" setup — was profitable in 0% of its variants.
Finding 5: So is ADX any good as a filter?
Yes. This is the part the conventional wisdom gets right, and it is worth being precise about how much.
Take every bar long, then raise the minimum ADX required before a trade is allowed. The region's median return-to-drawdown improves as the floor rises.
| Minimum ADX | SPY variants | SPY % profitable | SPY median Ret/DD | ES variants | ES % profitable | ES median Ret/DD |
|---|---|---|---|---|---|---|
| 0 (no gate) | 53 | 68% | 0.01 | 47 | 60% | 0.01 |
| 15 | 61 | 64% | 0.01 | 55 | 84% | 0.01 |
| 20 | 62 | 73% | 0.03 | 54 | 63% | 0.01 |
| 25 | 60 | 82% | 0.04 | 50 | 92% | 0.03 |
| 30 | 58 | 84% | 0.03 | 46 | 80% | 0.01 |
| 40 | 23 | 74% | 0.16 | 6 | 100% | 0.04 |
Read that honestly. The climb is real and it appears on both instruments, but it is not a clean staircase — SPY dips at 15, ES dips at 20 — and the 0.16 at the top rests on 23 variants, with the ES equivalent resting on 6. This is an indicator that improves an edge you already have. It is not one that manufactures an edge from nothing.
One more result belongs here, because it surprised me. The engine's own regime filters — a rising-volatility gate and a long-term trend gate — added nothing on top. Median return-to-drawdown with every filter off: 0.00 across 316 SPY variants. With any filter on: 0.00 across 1,638. A lift of exactly zero, and the same on ES. Stacking more gates on top of the ADX gate bought nothing.
The verdict, and the honest limits
The 2025 version of this article said ADX is a filter, not a signal, and that most traders misuse it by trading its crossings. Thirty-three years of data agree. That part holds up.
What the data adds is sharper, and it is the part I would want a reader to leave with. ADX is not a weak direction indicator that needs help. It is an accurate size indicator wearing a direction indicator's clothing. Use it to answer "how much room should I give this trade, and how big should the position be" and it is genuinely informative. Use it to answer "which way" and you are reading a speedometer for navigation.
And the compass strapped to it is wired backwards on index products. Not noisy, which I could have lived with. Backwards, the same way, on both instruments and both horizons.
The limits, stated plainly:
- Two instruments, one market. SPY and ES are both the S&P 500. Two agreeing datasets is better than one, but this is not evidence about crude, currencies, or single stocks.
- The biggest numbers rest on the thinnest samples. The 40-plus bucket is 3.7% of SPY days and 2.6% of ES days. The 0.16 gate result rests on 23 variants; its ES twin on 6.
- Frictionless. No commission, no slippage. Treat every magnitude as relative, not as money you would have kept.
- This is an event study, not a system. Events overlap in the measurement file, and the grid is a flat-only measurement sweep. It measures what follows an ADX state. It is not a strategy you can switch on.
- ADX(14) only. The length was not swept. A different lookback would move these numbers, though the structure — size, not direction — is unlikely to flip.
What this means for you
- Stop using ADX to pick a side. It has no directional content. That is not a criticism of the indicator; it is the indicator's own design, and the tutorials are the ones misreading it.
- Start using it to size and to set expectations. When ADX runs above 30, expect a wider range in both directions — 89% of those SPY days touched +1% and 76% touched −1% within 20 bars. That is a position-sizing input and a stop-placement input.
- Do not trade the DI crossover on an index. It was among the weakest families tested, and the held DI states point backwards.
- If you gate a long setup on ADX, use it as a floor, not a trigger. A minimum of 25 lifted the median long result on both instruments. Expect a modest improvement to something that already works, not a new edge.
- Do not short an equity index on a strong-downtrend reading. The textbook version of that trade — bearish DI, ADX above 40 — was profitable in 0% of its variants on SPY.
The $270,000 I lost in my early years went to reasoning exactly like the tutorials': an indicator that looked authoritative on a chart, adopted without ever checking what actually followed it. Checking is cheap now. The excuse for not checking is gone.
