ADX Analysis & ADX Trading Signals
Developed by J. Welles Wilder
This a momentum indicator used to determine the strength of a trading price trend: it is derived from the DMI - Directional Movement Index which has two lines.
+DI - Positive Directional Movement Index
–DI - Negative Directional Movement Index
ADX is calculated by subtracting these two values & applying a smoothing function.
The ADX isn't a directional technical indicator but a measure of the strength of the market trend which has a scale of Zero to 100.
Higher the technical indicator reading the stronger the price trend.
A value of below 20 indicates that the market isn't trending but heading in a range.
A value of above 20 confirms a buy or sell signal & indicates a new market trend is emerging.
Values above 30 indicates a strong trending market.
When ADX indicator turns down from above 30, it demonstrates that the current trend is losing momentum.
Directional Movement Index Trading Indicator
Since the ADX alone is a directionless indicator it is combined with the DMI index to determine the direction of gold.
DMI
ADX & DMI Index
When the ADX is combined with DMI index one can determine the direction of the trend & then use the this technical indicator to determine the momentum of the ruling trend direction.
Trading Analysis & Generating Signals
Buy Signal
A buy trading signal gets generated when +DI is above –DI, and the ADX trading indicator is above 20
Exit signal gets generated when technical indicator turns down from above 30.
Buy Trade Signal
Sell Trading Signal
A short signal gets generated when –DI is above +DI, & the ADX indicator is above 20
The Exit signal gets generated when technical indicator turns down from above 30.
Sell Trading Signal
Get More Tutorials & Lessons:
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- XAUUSD Charts Analysis How to Analyze XAUUSD Charts
- Counter Gold Trend Trading Strategies
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- XAU USD Platform Software Profiles & Saving a Gold Workspace Profile in MT4 Software
- How to Trade Different Types of Gold Charts
