The indicator is constructed with a strict correspondence Welles Wilder in his book "New concepts in technical trading systems"
Trading - Average Directional Movement Index ADX - Rules And Signals
The ADX indicator includes:
- ADX line
- a line + DI
- a -DI line
. Buy - Open a long position when + DI crosses above - DI
The extreme points upward is located at the intersection of + DI and -DI
This is the maximum price point of the day crossing
. Sale - Open a short position when + DI crosses above - DI
The extreme point decline is at the intersection of + DI and -DI
This is the minimum price point of the day crossing
the extreme point is used to filter false trade signals.
Formula - Average Directional Movement Index ADX
ADX = SUM ((+ DI - (-DI)) / (+ DI + (-DI)), N) / N
N - number of periods
SUM (..., N) - sum of the N periods;
+ DI - value of the indicator for the positive price movement (positive directional index);
-DI - value of the indicator for negative price movement (negative directional index).
Trading Analysis
Trade Forex - Example
Currency Pair: EUR / USD
Time Frame: H1 - 1 Hour
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