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What is ADX Indicator?
ADX or Average Directional Index is a technical analysis Indicator used by traders to analyse the trend.
This indicator was developed by J. Welles Wilder.
The main aim of this indicator was to measure the strength of the price movement in positive or negative directions using +DI or -DI.
Here, +DI = Directional Indicator (Positive) is the difference between the current high and the previous high.
-Di = Directional Indicator ( Negative ) is the difference between the current lows and the previous lows.
ADX = The average of +DI and – DI.
ADX Settings: How to use ADX indicator?
ADX strategy is one of the most powerful and easiest strategies.
Here, to illustrate ADX Strategy. I will use Olymp Trade. If you don’t have an Olymp Trade account yet Click here
You can also sign up via the form below.
Now, once you have signed up you will land on the Olymp Trade dashboard.
Firstly, Click on the chart button and select Japanese Candlestick from the menu.
Secondly, click on the Indicator button and select the Average Directional Index from the menu.
Your dashboard will look something like given below.
Now, click on the pencil sign and darken the +DI, -DI, and ADX lines for more clarity.
That’s it!! The basic setup is over. now let’s look at ADX strategy.
ADX indicator strategy: Trend strength Indicator
The golden rule of ADX strategy says:
If +DI and -DI intersects each other but +DI is above the -DI then here, we should go for BUY Trade.
If +DI and -DI intersects each other but -DI is above the +DI then here, we should go for SELL Trade.
Now, you must be wondering How to use Adx indicator then?
Well, ADX is the most important indicator.
If there is a lot of confusion between the +DI and – DI line then we will trade using ADX with Support and resistance.
The golden rule of ADX says.
If ADX is below 20 then there is no trend.
If ADX is above 25 then there is a strong bullish or bearish trend.
If ADX is above 35 then there is an extreme trend and you can make lots of profit here.
Here, we can clearly see +DI and -DI intersects each other but +DI is above the -DI then here, we should go for BUY Trade.
At Point 1, there is a lot of confusion between the +DI and – DI line then we will trade using ADX and Support and Resistance lines.
At point no 2 and point 3, we can clearly see +DI and -DI intersects each other but +DI is above the -DI then here, we should go for BUY Trade.
I hope you have found this article helpful.
So, trading with the ADX indicator is so easy.
You just need to remember the +DI and -DI golden rule.
However, If there is a lot’s of confusion then use ADX with Support and Resistance.
If you still have any problem you can comment below or mail us at Honstdigitalreview@gmail.com
Till then Best of luck 🙂