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ADX Technical Analysis and ADX Forex Trading 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 two 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 Technical Indicator Analysis - ADX Technical Indicator MetaTrader 4 - Best Indicator for 1 Minute Chart

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

The higher the indicator value the stronger the trend.

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

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

Values above 30 signifies a strong trending market.

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

ADX combined with DMI - Directional Movement Index

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

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

DMI

ADX and DMI Index

ADX Forex Trading indicator and DMI Index Indicator Example Explained - ADX Trading Technical Indicator - Indicator ADX Indicator MT4 - Best Technical Indicator for 1 Minute Chart

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 trend direction.

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Technical Analysis and Generating Signals

Buy Signal

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

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

ADX Indicator Buy Technical Analysis - ADX Forex Buy Signal - ADX Indicator MT4

Buy Signal

Sell Signal

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

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

ADX Indicator Sell Signal - ADX Indicator Sell Forex Signal - ADX Trading Indicator

Sell Signal


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Technical Indicators