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Thread: Indicator ADX

  1. #1
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    Indicator ADX

    Hello Everybody! Welcome to my thread. First of all I would like to say big thanks to the forum admin, moderators and educator for bringing another very unique contest. This time I think the contest is different from others. And in this contest I am going to write my review on Indicator ADX as mentioned in the thread title.

    Forex: Uncertain Forex

    Those who are in forex business for some time must know how difficult it is to predict direction, momentum and strength of a currency pair at any instant. That is why everybody say forex is always a mystery. And to reveal those mystery we like to use our experience, some mathematics and statistics.

    Let's Find Some Probable Solution:

    Scientist and mathematician helped us in many way. And they developed many indicators, trading signals and many more to help us to reveal internal things of forex trading. Here we are interested in forex indicators and if you are interested to use it you will find yours among thousands....

    Forex Indicator:

    Indicators are basically mathematical tools which use market price data over a period of time and inform us the possible pattern the market might make in near future. It can't predict market move but surely can give us some data which can be effectively used for our money making if we follow our trading system all the time and every time.

    You will find thousand of indicators in the market and all are fine depending on the market situation and scene. Here I am going to discuss about indicator ADX.

    Introduction to Indicator ADX:

    We know the best way to make money in forex trading is to go with the trend. And if we can find a strong trend then you will just see your money growing every hours. ADX(Average Directional Index) is such an indicator which is used to determine the strength of a trend. In other word we can say ADX is a trend strength indicator.

    Description of ADX:

    This indicator will give you a numeric value ranging from 0 to 100 depending on the moving average of price over a certain period of time. Lower the value of ADX concludes the weakness of trend. Bigger value means bigger strength of the market.


    Feature and Principles of ADX:

    We find ADX is a single line which is scaled between 0 and 100. In a ranging market the line will stay close to 0 value and trending market reads higher values over 25. This ADX line is accompanied by two more lines known as DMI(Directional Movement Indicator). ADX and DMI's are packed together and found on the same chart at a time. So the lines you will find are ADX, -DMI and +DMI. For simplicity we will focus only on ADX line and forget the reading of DMI's. Here in the following image you can find the line in white is the ADX values, +DMI in green and -DMI in red. If you look at the indicator closely will find when a trend is generating ADX start to give higher values and in a ranging market it just reads low.



    No matter market is bullish or bearish if the trend is strong the line will go high to higher. And you can compare this indicator with RSI in different way.

    Settings of Indicator:

    You can use this indicator along with your price chart of your MT4 in any currency pair. Simply click on the insert of your menu chart. Select Indicators from drop down menu. Next you will see the Trend sub menu. Just place your mouse pointer and you will find the Average Directional Moving Index on the top of the sub menu of new drop down menu. Just click on that as shown in the image given below. It will open a new window from where you can select the ADX line's colour, period and price point for each candle which will be taken into consideration for plotting the line. You can select the colour of DMI's too. The image shown above is found for period 5 but by default it is set for 14 candles.


    Recommendation Regarding ADX:

    Sometime we struggle to make decision to open a trade in a trendy market as we are in doubt whether the current trend will continue or reverse. I think this indicator is a very good way to find the strength of trend of a currency pair and make trading decision. I found it gives better result in trade when you use it with other indicators like MA, MACD and RSI. So I have some specific recommendation when you are using this indicator. Those are...

    1. Indicator value don't give you a buy/sell signal rather it just tell you about the strength or weakness or trend.

    2. Lower reading don't mean the end of a trend. It simply means price movement is slow and oscillating. So don't go to close the trade immediate when profit run in a trade.

    3. When you trade many pairs it is one of the easiest way to find trend strength of different pairs and pick the best pair for yourself to trade and bring good result in quick time.

    4. To get better result open your trade only when indicator reads above 30 but always trade with in limit using money management and stop limits to avoid unwanted situations.

    5. Don't open a trade when indicator reading is very high in the range of 80/90. Because there is a strong possibility of reversing the trend.

    Concluding Words:

    Just remember one thing that there is no indicator in the world which can give you 100% prediction correctly. So no matter what indicator we use in trade we must trade with lower risk so that we can survive for in the market and can avail more chances.

    ADX definitely is one of the easiest and simplest indicator to use to get outstanding results in trading. And I believe sensible use of this indicator can bring us a lot of success in relatively quick time. It can be effectively used by all types of traders too.

    I just want to say thanks again for those who read my thread. My thread opening will be successful if some trader get to know about this indicator and can use it in trading. I must say thanks again to this nice forum for bringing another unique contest to forum members. I wish the success of this contest and very good wishes for all the participants. Thanks everybody.

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    Last edited by nkhan2810; 05-09-2015 at 08:12 PM.

  2. #11
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    Quote Originally Posted by rinaji View Post
    Mate...,
    What is mean by 5 units?
    Is that mean "period"?

    thanks.
    Well, good to get you back in the tread. When I am scalping I set chart at M5. Now to set the indicator I also put the period of 5. It simply means the value of my indicator gives is dependent on last 5 candles of M5. If you set the period at 7 then it will calculate the values of 7 M5 candles. So here 5 units I meant 5 candles or 5 period. Even sometime I go with M1 chart and set the indicator period 10 or 14.

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  3. #12
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    But I try to open a trade when the indicator reads above 30 and in between 60.
    So the blue area is the tradeable area, right?


    Quote Originally Posted by nkhan2810 View Post
    Well, good to get you back in the tread. When I am scalping I set chart at M5. Now to set the indicator I also put the period of 5. It simply means the value of my indicator gives is dependent on last 5 candles of M5. If you set the period at 7 then it will calculate the values of 7 M5 candles. So here 5 units I meant 5 candles or 5 period. Even sometime I go with M1 chart and set the indicator period 10 or 14.
    I get back in the thread because I know you have good scalping strategy lol....
    Just like what I see you have many times of getting win in demo contest.
    So there is nothing wrong for me to steal your idea, right?

    If you trade with this indicator, do you add another indicators as the combination? Especially for entry and exit confirmation.

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    If you lose, be patient. If you win, stay humble

  4. #13
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    Quote Originally Posted by rinaji View Post
    So the blue area is the tradeable area, right?



    I get back in the thread because I know you have good scalping strategy lol....
    Just like what I see you have many times of getting win in demo contest.
    So there is nothing wrong for me to steal your idea, right?

    If you trade with this indicator, do you add another indicators as the combination? Especially for entry and exit confirmation.
    Thanks for coming again. I usually share everything I have and you are most welcome if you can steal my strategy. I usually try to use Support and Resistance for entry and exit of my trades. When I see 3/4 candles in the same direction I usually open a trade with profit pip target of half of the body of 3/4 candles and I place SL just about half of the candle bodies. And success rate is good around 70% wins using this strategy.

    And yes, the blue region you have drawn I like to trade or open new orders.

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    Last edited by Gulfstream; 05-27-2015 at 01:55 PM. Reason: del pictures

  5. #14
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    As I said using ADX you can get how strong a trend is but it does not tell which trend is going on. It may be bullish or bearish. If you use both DMIs then you can know about the bull trend or bear trend. You can find when a bull trend is dominating it is always over -DMI and vice versa. Here I have indicated bull trend with green lines and bear trend with red lines. When DMIs are crossing each other means probable reverse in trend. Scalper can use it effectively for get very small 5 or 10 pips for every cross of DMIs. It is better to avoid trading when DMIs stay very close and you will see ADX is also flat at this point.


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  6. #15
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    Today I am going to show how we can trade using the ADX indicators. You can find I have added 3 ADX indicator of different period with H1 chart of EURUSD. Here the periods are of 5, 14 and 28. I opened a 1 lot trade with profit target of 20 pips and SL of 40 pips so here the risk to reward is 2:1. You can see I opened the trade when all ADX read 30 or above and all green lines of positive DI are above the red lines. I will come back with the results for sure.


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    Last edited by nkhan2810; 05-22-2015 at 02:32 PM.

  7. #16
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    USD was bullish which drove EURUSD go down to almost 70 pips that just hit the SL and gone though it. Sorry it did not work at this point. Probably next week I will try to show few trades using this indicator. So stay tuned. And I would love to see more comments from views about this indicator.

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    Last edited by nkhan2810; 05-22-2015 at 03:44 PM.

  8. #17
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    Quote Originally Posted by nkhan2810 View Post
    USD was bullish which drove EURUSD go down to almost 70 pips that just hit the SL and gone though it. Sorry it did not work at this point. Probably next week I will try to show few trades using this indicator. So stay tuned. And I would love to see more comments from views about this indicator.
    Surely I will stay tune in this threads. As now I am started learning about indicators. Soon I will find how well actually indicators can work. Eurusd is actually in a bearish trend in my view. I knew it will come back and would not stay for long over 1.1400 mark. I think it will head back to 1.0650 soon. But this is just my view may not be true.

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  9. #18
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    Quote Originally Posted by forexfighter007 View Post
    Surely I will stay tune in this threads. As now I am started learning about indicators. Soon I will find how well actually indicators can work. Eurusd is actually in a bearish trend in my view. I knew it will come back and would not stay for long over 1.1400 mark. I think it will head back to 1.0650 soon. But this is just my view may not be true.
    Thanks for your visit and comment. It is good to know you become interested about indicators. You can find all indicators are based on some present and/or previous data. So many times it help you to get some idea about market movement with in few click though price itself is a big indicator. Today market is very slow so I am waiting for the ADX value to touch or go above 30 so that I can open a trade. May be tomorrow I will open a trade it read 30 or above.

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  10. #19
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    I am very sorry I could not give updates on using the indicator in real/demo trading due to some very high work load. I have just opened a new trade using this indicator. You can find I opened the trade when ADX reads 77 for 5 period and 33 for 14 period and green DMI is well over the red line. Here my profit target is 20 pips and SL is set at 40 pips.


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  11. #20
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    My trade hit the SL for the second time and it produced loss as well. Actually EURUSD is very much unstable these days and moving violent. Sorry guys I could not show you good results at this moment. As contest is finishing today I just say I hope to update few trades here even after the contest finish and you can try on your demo account as well. Thanks for your visit and comments.

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