ADX Commodities Trading Technical Analysis & ADX Trading Signals

Created by J. Welles Wilder

This a momentum indicator used to determine the strength of a commodity price trend: it is derived from the DMI - Directional Movement Index which has 2 lines.

+DI - Positive Directional Movement Index

–DI - Negative Directional Movement Index

ADX is calculated by subtracting these 2 values & applying a smoothing function.

The ADX is not a directional technical indicator but a measure of the strength of the commodity trend which has a scale of Zero to 100.

The higher the technical indicator value the stronger the trend.

A value of below 20 indicates that the commodities market is not trending but heading in a range.

A value of above 20 confirms a buy or sell signal and indicates a new commodity trend is emerging.

Values above 30 signifies a strong trending market.

When ADX indicator turns down from above 30, it indicates that the current commodity trend is losing momentum.

Directional Movement Index Technical Indicator

Since the ADX alone is a directionless indicator it is combined with the DMI index to determine the direction of commodity.

DMI

ADX and DMI Index

When the ADX is combined with DMI index a trader can determine the direction of the trend and then use the this indicator to determine the momentum of the prevailing commodity trend direction.

Commodity Trading Technical Analysis & How to Generate Signals

Buy Trading Signal

A buy signal is generated when the +DI is above –DI, and the ADX technical indicator is above 20

The Exit signal is generated when indicator turns down from above 30.

Buy Trading Signal

Sell Trading Signal

A short signal is generated when the –DI is above +DI, and the ADX technical indicator is above 20

The Exit signal is generated when indicator turns down from above 30.

Sell Trading Signal