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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. #21
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    ADX indicator is an indicator through which you can make a good predict that where the trend is over or not.yes through that you can understand you can see that if you can make money with it or not. If you want to make money with trading you can make money with it.

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  3. #22
    Trader layigold's Avatar
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    I have equally found the use of this indicator very helpful because it does help me to stay in a trade when it shows that the trend is very strong, though sudden economic news release can cause the market to reverse and that is why it is always good t plan your trade well. What I do is to lock in some profits so that I will not be a loser should the trade reverses significantly

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  4. #23
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    this indicator is good for determination of the direction of the market and its strength too, i was using it in the past and get good results with it but when i moved to better way of trading i stopped using it, but it is still one of the widely used indicator and many traders around the world use it, it can be used as a good confirmations for successful trading.

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  5. #24
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    This is one of individuals indicators that I have never known how to use it very well because I always find it very confusing especially for the time when a currency pair is trending just like the way great Britain pound is behaving right now thats one thing that you are not sure where the indicator Is applicable

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  6. #25
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    ADX or average direction index is always something that I used to trade. we have to really think fast we have to work and understand we have something out of what we have done when trading forex we have to really think of a greater chance we deal with there is always the best effor that we deal with that really secures us the right to every trade

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  7. #26
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    indicator ADX is one of the indicatrs that determine the trend and so the trader can use for trading, though this indicatr is widely used by the traders but i did nt use it before because i did nt understand it well and so i ignored it and used onther indcators for trading, but it wrk well with the traders that use it and give good results and god return.

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  8. #27
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    Technical analysis is must be do all traders in Forex market. ADX indicator result is good but most of traders can't use this indicator or can't understand about this indicator. Newbie traders analyze many indicator ,also try to trade by the indication but they can't found any good result.

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  9. #28
    Trader YoyO_o's Avatar
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    select currency pair, monitor it for a few weeks, apply ADX and calculation and then trade demo or practice account using the signals you getting from indicator

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  10. #29
    Trader snnaky's Avatar
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    [lang=ar]In fact, I do not like the indicators. Do not trust it is very misleading. Many of my losses were due to these price indicators.
    I think these tools are very old and we need to develop better tools. But I'm relying on subsidies and resistors in addition to Fibonacci[/lang]

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  11. #30
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    ADX is one of the indicators that are best use in forex trading because there are many advantages that traders can derive from using it if it is properly used well. Among the benefits are : ADX helps to determine the strenght of the market which helps to know whether the market has weak or it strengthening.Also ADX is used sometimes to know the entry point for buying and selling and this could be used when the D plus crosses up the D minus at this point , buy order is generated while sell order is generated when d plus crosses down the D minus.

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