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Chapter 12, Part VII. Average Directional Move Index – ADX.

Discussion in 'Complete Trading Education- Forex Military School' started by Administrator, Jul 7, 2011.

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  1. Administrator

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    Part VII. Average Directional Move Index – ADX. [​IMG]
    Commander in Pips: There are a lot of different indicators were invented during the most recent 20 years, and of course we can’t discuss all of them. So, I think, that we should finish discussion of particular indicators with this one – Average Directional Move Index, better known as ADX. This indicator also consists of a single line, and the major purpose of this indicator is the estimation of different phases of a trend. So it’s used for work with trend. The specific of ADX is that it does not show direction of trend, but only its strength. ADX is always positive and changes in 0-100 range. At the same time, this indicator rarely move above 50-60 level.

    [​IMG]

    Pipruit: This is something new…

    Commander in Pips: Yes. So, it was also created by W. Wilder and has some similar procedure in its math. But I know that you’ve tired from math already, so we will skip that during the current discussion. Anyway, you will want to study it later – you will easily find ADX formula in the net. It’s a bit complicated – almost as complex as the RSI one.

    Pipruit: Thanks Commander, I owe you one.​

    Commander in Pips: You’re welcome. So, let’s shift directly to application of ADX:


    Chart #1 | GBP/USD Weekly and ADX (10)
    [​IMG]

    ADX has only single tuning parameter – the number of periods, prices of which will be used for ADX calculation. The greater this period the more lazy and smooth the ADX line and the more rarely it will show significant moves. Here on the chart we have a 10-period ADX.
     
    #1 Administrator, Jul 7, 2011
    Lasted edited by : Mar 24, 2016
    Hamza Samiullah and fran alvarez like this.
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