ADX: The Trend Strength Indicator

If the change from the previous bar is greater, say 0. When ADX is below 25 for more than 30 bars, price enters range conditions, and price patterns are often easier to identify. When price makes a higher high and ADX makes a lower high, there is negative divergence, or non-confirmation. On the right side of the indicator panel you will see a scale from 0 to only 0 through 80 are marked. A horizontal line can be added to help identify ADX moves. In many cases, it is the ultimate trend indicator. The Connors Group, Inc.

(You can also use ADX as a low-risk day trading trigger with the 2-period ADX.) While the value of ADX is significant, the slope of ADX is also a valuable tool. After all, for ADX to move above 25, it must first tilt up.

Calculation

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Trading Strategies Headlines

Details from webinar from The Trading Zone show a Simple Trading System Using ADX and DMI. Many trading strategies like Linda Raschke’s Holy Grail and Jeff Cooper’s 5 Day Momentum Method use the ADX indicator to identify strong trends. However, day trading with the ADX indicator is not common. The reason is while the ADX indicator is good at identifying strong trends, it is a lagging indicator. Wilder put forth a simple system for trading with these directional movement indicators. The first requirement is for ADX to be trading above This ensures that prices are trending. Many traders, however, use 20 as the key level. A buy signal occurs when +DI crosses above -DI. Wilder based the initial stop on the low of the signal day.