Spotting volatility breakouts that are likely to continue can be daunting. The Average Directional Movement Index (ADX) — an indicator that measures trend strength — can help. The ADX is unique because it can work as a “leading indicator” that reveals the strength of a market’s trend before a breakout move occurs. The main ADX line is typically displayed along with two other lines — the Directional Movement Indicators (+DMI and -DMI) — and the three can be used together to help reveal strong trends.

The main ADX line ranges from zero to 100 (the higher the reading, the stronger the trend) and usually fluctuates between 10 and 50. Readings below 20 reflect trendless conditions — consolidations that should be avoided.