1. ## 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.

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.

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.

2. Thanks to choose this indicator as your materials in this contest. ADX is one of my favorite indicators, but I never used it, I was a strange person, I have a favorite indicator, but I never use it.

Originally Posted by nkhan2810
1. Indicator value don't give you a buy/sell signal rather it just tell you about the strength or weakness or trend.
Maybe if we just pay attention to ADX line, we only able to identify the strength of a trend, but if we pay attention to this indicator as a whole (with DMI line), then we could identifythe strength of trend and direction of the trend. right?

thanks dear nkhan

3. Originally Posted by rinaji
Thanks to choose this indicator as your materials in this contest. ADX is one of my favorite indicators, but I never used it, I was a strange person, I have a favorite indicator, but I never use it.

Maybe if we just pay attention to ADX line, we only able to identify the strength of a trend, but if we pay attention to this indicator as a whole (with DMI line), then we could identifythe strength of trend and direction of the trend. right?

thanks dear nkhan
Well thanks rinaji for visiting my thread and commenting. Actually I found this indicator is very simple and very good way to indicate market situation specially in a trending case. Yes, surely if you use DMI's you may get more trending information specially when a trend reversing or getting stronger.

4. Wow that's looking great Nkhan2810, I have never used this type of indicator before in my trading system, I am a big fan of trend follower indicator's. This is a very new trend follower indicator for me and its not looking any type of complex trading indicator to judge market trend direction. Hope you will win first prize in this contest because you deserve it friend

5. Originally Posted by Khimi234
Wow that's looking great Nkhan2810, I have never used this type of indicator before in my trading system, I am a big fan of trend follower indicator's. This is a very new trend follower indicator for me and its not looking any type of complex trading indicator to judge market trend direction. Hope you will win first prize in this contest because you deserve it friend
Thanks for your comment Sis. Yes, it is very easy trend following indicator. Surely you can try this one on your demo account for practice and master it. You know this is a long contest and I would love to see many more threads which will help us understand more indicators. I would love to get any place I given. But one thing is for sure that I am very much sportive, love to compete, love to challenge.

6. Originally Posted by nkhan2810
Thanks for your comment Sis. Yes, it is very easy trend following indicator. Surely you can try this one on your demo account for practice and master it. You know this is a long contest and I would love to see many more threads which will help us understand more indicators. I would love to get any place I given. But one thing is for sure that I am very much sportive, love to compete, love to challenge.
Yes I will do demo practice with it first, As far I know its a long contest and will finish in the end of this month, This is good for our learning because from more new threads we can gain more idea and knowledge about the market. I have one more question for you are you using Indicator ADX in your current trading activity?

7. Originally Posted by Khimi234
Yes I will do demo practice with it first, As far I know its a long contest and will finish in the end of this month, This is good for our learning because from more new threads we can gain more idea and knowledge about the market. I have one more question for you are you using Indicator ADX in your current trading activity?
It is good to know you are interested about the indicator. I think your demo practice will give you a nice idea how to use it. Yes, I do use this indicator in my real trading. As I am a scalper so I usually set 5 units for this indicator. But I try to open a trade when the indicator reads above 30 and in between 60.

8. Indeed ADX is one of the good indicators available which is available in MT4. I really like to use this indicator to determine the strength of the indicator. But the sad part is that they actually do not indicate the direction itself. Do you have any advise on which time frame this works better according to your trading experience.

9. Thanks for your comment on my thread. Really it is a good trend following indicator. If you use DMI along with the ADX you can find the bull trend or bearish trend. I found it can be used in any time frame. But it gives better result when you try it in higher time frames like 1H or 4H or even D1. And for my scalping I generally use the M5 time frame.

10. Originally Posted by nkhan2810
It is good to know you are interested about the indicator. I think your demo practice will give you a nice idea how to use it. Yes, I do use this indicator in my real trading. As I am a scalper so I usually set 5 units for this indicator. But I try to open a trade when the indicator reads above 30 and in between 60.
Mate...,
What is mean by 5 units?
Is that mean "period"?

thanks.

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