ADX Analysis and ADX Signals
Created by J. Welles Wilder
This a momentum trading indicator used to measure the momentum 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 2 values & applying a smoothing function.
The ADX isn't a directional trading indicator but a measure of the strength of the trend which has a scale of Zero to 100.
Higher the technical 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 and indicates a new market trend is emerging.
Values above 30 shows 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 Trading Indicator
Since the ADX alone is a directionless indicator it is combined with the DMI index to determine the direction of the currency pair.
DMI
ADX and DMI Index
When the ADX is combined with DMI index one can figure out the direction of the trend and then use the this MT5 indicator to determine the momentum of the current trend direction.
FX Analysis & Generating Signals
Buy Signal
A buy trade signal is generated when +DI is above –DI, & the ADX trading indicator is above 20
Exit signal is generated when trading indicator turns down from above 30.
Buy Trading Signal
Sell Trade Signal
A short signal is generated when –DI is above +DI, & the ADX indicator is above 20
The Exit signal is generated when technical indicator turns down from above 30.
Sell Trade Signal
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