Average Directional Index ( cashbackforexexness) forex rebate club another indicator invented by Welles Wilder in 1978 If you are visually attuned to the fact forexrebateclub an upward cashback forex always means that price is rising, then the ADX will be very difficult for you to use In fact, the ADX measures trend strength without regard to trend direction, so when the downtrend is strong, the ADX line may move upward The ADX is often called the leading indicator because its momentum weakens before the price reaches a top or bottom cashbackforexbroker then begins to reverse This is Wilders hypothesis and is generally sound, but remember that all momentum indicators perform best in trend situations, but give false signals in range trading situations In fact, one of the main applications of the ADX is to distinguish between trend situations and range trading In fact, one of the main applications of ADX is to distinguish between a trend situation and a range trade situation ADX is almost always plotted together with two other indicators indicating direction: the opposite directional movement indicator (-DI) and the positive directional movement indicator (+DI) so that you will have both the strength and direction of the trend ADX is plotted as a line with a value from zero to within 100 25 is the dividing line between "weak trend or no trend" and trend The trend is strong between 25 and 50, and very strong between 50 and 75. If the value reaches 75 to 100, the trend is very strong and you should watch for overbought or oversold prices. /First, you must calculate the directional move, abbreviated as DM When the price trend is up, DM is counted as positive: +DM It is called positive DM or positive DM and is also called upward shift If the direction is downward, DM is counted as negative or -DM It is called negative DM or negative DM and is also called downward shift When todays high minus yesterdays high is positive (upward shift ) and the value is greater than the value of yesterdays low minus todays low (downward shift) and is also greater than zero, it is counted as +DM When the downward shift > upward shift and the downward shift > 0, it is counted as -DM The actual +DI indicator is calculated in the following way: and the -DI part is calculated in a similar way: note that if +DM is negative, the value will be 0, and if the -DM indicator is Wilder uses 14-day periods for DM and ATR, but you can also use other periods or modify the EMA (Exponential Moving Average) to a different version Finally, we conclude that Wilder invented ADX (and all the indicators he invented) before the advent of computers Fortunately, today every program contains preset versions of ADX, component -However, it is worthwhile to master its calculation, because ADX has a lot of smoothing DM components are smoothed by excluding internal days, while ADX is smoothed by dividing by ATR. The advantage of this is to get a really reliable indicator, but the indicator will be relatively lagging and difficult to elaborate. In the following picture example, we see that compared to the time when the ADX line is above 25 Now lets add the +DI, as shown in the chart below (blue dashed line) the cross section of the left +DI line with the red ADX line indicates that an uptrend is forming the right cross section indicates that the trend is ending the left cross Thinking for a moment about the left crossover, it appears that the trend is too late but looking again at the price - it is found that the price is oscillating in a range and not forming a trend with the ADX with one of its components - the +DI crossover is bigger in size and shows the same situation we can draw We can draw a red ascending support line, which may make us ignore the unfavorable sideways movement marked by the gold line until the end of the gold line and we never see the break of the previous high. Note that when the price in the top window starts to rise, -DI falls below +DI and when an uptrend is formed, -DI stays in line most of the time. As with all crossover systems, +DI moving up through -DI means that the buy signal is on the far right and the support line has broken -DI above +DI Again, please dont be misled by the rising indicator it refers to an increase in downward strength, not an increase in price Here, -DI above +DI represents a sell signal You may wishfully believe that the downside break of the support line is a transient situation, but the ADX system tells you not to be foolish --Get out of the ADX crossover with +DI and -DI Unfortunately, you will see many unrelated crossovers and these crossovers can be extremely confusing so it is best to combine the ADX with other confirmation indicators, including MACD and pattern recognition
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