ADX INDICATOR TREND STRENGTH AND DIRECTION.

ADX INDICATOR TREND STRENGTH AND DIRECTION.

The Adx indicator correctly analyzes the market trend if you understand the three criteria.

And It is new trading strategies for Forex and Stock Market, using this indicator.

It is an indicator that measures trend strength and shows trend direction.

The ADX tells traders whether the bulls or the bears are in control of the market, and It is an oscillating indicator, displayed as a single line, ranging from 0 to 100.

Adx Strategy

It only indicates the strength of the trend and does not indicate its direction.

The ADX is non-directional, meaning that it measures the strength of a

trend, but doesn’t distinguish between uptrends and downtrends.

So, during a strong uptrend, the ADX rises, and during a strong downtrend, the ADX also rises.

Here is how you correctly read what the ADX is saying about the Forex and Stock Market.

Five interpretations of the ADX Indicator.

When ADX (the Deep Sky Blue) is above 23, the trend strength is durable enough for strategies involving trend following.

In this example, we see the ADX line crossing the 23 Level, indicating a strong bull market.

Usually, once the ADX gets above 23, this signals the beginning of a trend.

Big moves (upwards or downwards) tend to happen when ADX is right around this level(23).

ADX Line with Confirmation

Of course, you can try with this level(23), some traders that want faster signals, tend to use a 20 scale.

The ADX line breaks above this level as the price continues its upward movement.

Remember, ADX is non-directional, so its line above 23 also indicates strong downtrends.

When ADX is below 23, traders must avoid trend trading strategies as the market is in the accumulation or distribution phase.

Adx Line +DI and -DI Combination

We can see the lack of a trend, as the price trades within a range.

So, when we see the ADX line below 20 or 23 levels, we forget about trend trending strategies, and we apply strategies suitable for ranging markets.

When ADX is above 23, and the (+DMI) is above (-DMI) then ADX measures the strength of an uptrend.

Adx Two Type Crossover

When ADX is above 23, and the (+DMI) is below (-DMI) then ADX measures the strength of a downtrend.

How you know a strong trend and Weak trend

Use good Accuracy

When ADX is above both (+DMI) and (-DMI) and cross-level 23 upward, then it is called a strong uptrend.

And ADX is below both (+DMI) and (-DMI) and cross-level 23 downward, then it is called a strong downtrend.

ADX Basic Structure with Adx Indicator.

 The bears are in complete control of the market, as the (-DMI) is above the (+DMI), and the ADX line rose 50 levels.

The level of over 50 of the ADX indicates a dominant trend, and plz Check out this below chart.

Basic Structure

Why is the ADX useful for traders.

It is excellent at quantifying trend strength, and also, it allows traders to see the power of bulls and bears at the same time.

It is good at filtering out trades, during the accumulation periods and also good at identifying trending conditions.

But the Adx also has its limitations. The most crucial disadvantage is the fact that ADX is a lagging indicator that follows the price.

When we apply this indicator, then we have ADX, + DMI, and – DMI.

Also, it offers many false signals when used on shorter timeframes, so it’s preferable to trade it on higher timeframes.

The ADX does not contain all of the data necessary for proper analysis of price action, so it must be in combination with other tools or indicators.

Now that we thoroughly covered the good and the
bad regarding ADX.

ADX Positive Crossover in a trading strategy.

Positive Crossover

When the ADX Blue Line above  23 and the (+DMI) Greenline crossing above the (–DMI) Redline, suggest to trade buy to any currency pair with Stop Loss by previous swing candle low value and adding Trailing Stop loss.

ADX Positive Crossover in a trading strategy.

Negative Crossover

If the ADX Blue Line above  23 and the (+DMI) Greenline crossing below the (–DMI) Redline, suggest to trade Sell to any currency pair with Stop Loss by previous swing candle low value and adding Trailing Stop loss.

Keep in mind, Read price first, and then read ADX in the context of what price is doing.

Use ADX to determine whether prices are trending or non-trending, and then use the trading strategy to trade in the direction of the trend.

After all, the best profits come from trading the most influential trends and avoiding range conditions.

If you got any value from this above post of Adx Indicator, please consider my position, and share it with your friends and family who interested in forex, as it would help us a lot in the future. 

 

Try from It.

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About Muhammad Shahid

My name is Muhammad Shahid, MBA in Finance from IBA, University of Sindh, Professional Forex Trader & Trainer, I have taught more than 850 Students throughout the Sindh.

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