Forex Indicator “Average Directional Movement Index (ADX)”
Forex Indicator “Average Directional Movement Index (ADX)”
This ADX forex indicator helps to define the trend of the price.
It is built on the Welles Wilder’s approach.
This simple method of trading uses the comparison of two trend indicators: the 14-period -DI and the14-period + DI. For this the + DI is subtracted from the -DI or the graphs of indicators put one on the other. Wilder recommends to buy when + DI goes higher than -DI, and to sell when + DI goes lower than -DI.
The “rule of extreme points” is also applied. It is used to limit false signals and diminish the number of deals. According to the rule, when the + DI and -DI cross one should mark the “extreme point”. If the + DI goes higher than the -DI, the maximum price of the day is this point. If + DI goes lower than -DI, then the minimum price of the day is the extreme point.
The extreme point is used as the level of the market entry. Thus, to buy one must wait until the price goes above the extreme point. If it doesn’t to go over the extreme point, one should keep the short position.
