ADX Analysis & ADX Signals
Developed by J. Welles Wilder
This a momentum indicator used to identify the power of a trading price trend: it is derived from the DMI - Directional Movement Index which has two lines.
+DI - Positive Direction Movement Index
–DI - Negative Direction 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 power of the market trend which has got a scale of 0 to 100.
Higher the technical indicator reading the stronger the price trend.
A value of below 20 shows that the market is not trending but moving in a range.
A value of above 20 confirms a buy or sell signal & indicates a new market trend is emerging.
Values above 30 indicate a strong trending market.
When ADX turns down from above 30, it demonstrates that the ruling trend is losing force.
Directional Movement Index Trading Indicator
Since the ADX alone is a directionless indicator it is combined with the DMI index to identify the direction of gold.
DMI
ADX & DMI Index
When the ADX is combined with DMI index one can determine the direction of the trend and then use the this technical indicator to identify the force of the ruling trend direction.
Trading Analysis & Generating Signals
Buy Signal
A buy signal gets derived & generated when the +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 sell signal gets derived and generated when the –DI is above +DI, & the ADX 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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