Trade Forex Trading

ADX Analysis and ADX Signals

Built and Made by J. Welles Wilder

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

+DI - Positive Direction Movement Index

–DI - Minus Direction Movement Index

ADX is calculated by subtracting these two values and applying a smoothing function.

Average Directional Index (ADX): Using ADX for 1-Minute Chart Analysis

The ADX serves not as an indicator of market direction but measures the intensity or strength of the prevailing trend, operating on a scale from 0 to 100.

Higher the trading indicator reading the stronger the market trend.

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

A reading exceeding 20 validates a signal for either buying or selling, indicating the commencement of a new market direction.

Readings Over 30 Point to a Strong Trend.

ADX falling from over 30 means the trend is weakening.

ADX with DMI Combined - Understanding the Directional Movement Index Indicator

Because ADX does not show direction on its own, it is used with the DMI index to find out which way a currency pair is moving.

ADX with DMI Guide - Directional Movement and ADX Analysis

DMI

ADX & DMI Index

ADX & DMI Index Indicator Example Explained - ADX Indicator

When combined with the DMI index, ADX can help identify both market direction and trend strength. This indicator offers valuable insights into current price momentum and energy.

Forex Analysis and How to Generate Trading Signals

Buy FX Signal

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

Exit signal is derived/generated when indicator turns downwards from above 30.

ADX Buy Analysis - ADX Buy Trading Signal - ADX MT4

Buy Signal

Sell Trade Signal

A short selling indicator signal is realized when the –DI reading surpasses the +DI reading, and the ADX registers above 20.

The signal to exit a trade position is generated when the chosen technical indicator declines from a level exceeding 30.

ADX Sell Signal - ADX Sell Signal - ADX Indicator

Sell Signal

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