Trade Forex Trading

ADX Analysis and ADX Signals

Developed by J. Welles Wilder

This a momentum indicator used to determine the strength of a 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 two values and applying a smoothing function.

Average Directional Index (ADX) - ADX Indicator Analysis - ADX Indicator MT4 - Best Indicator for 1 Minute Chart

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

Higher the indicator value the stronger the market 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 trend is emerging.

Values above 30 demonstrates a strong trending market.

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

ADX combined with DMI - Directional Movement Index Indicator

Since the ADX alone is a directionless indicator it's combined with the DMI index to figure-out the direction of the currency pair.

ADX Indicator Combined with DMI - Directional Movement Index Indicator Analysis - ADX Indicator Analysis

DMI

ADX & DMI Index

ADX Trading indicator & DMI Index Indicator Example Explained - ADX Indicator

When the ADX is combined with DMI index one can determine the direction of the trend & then use the this indicator to determine the momentum of the prevailing trend direction.

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Forex Analysis and How to Generate Trading Signals

Buy Forex Signal

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

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

ADX Indicator Buy Analysis - ADX Buy Signal - ADX Indicator MT4

Buy Trading Signal

Sell Signal

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

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

ADX Technical Indicator Sell Signal - ADX Indicator Sell Signal - ADX Indicator

Sell Trade Signal

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