ADX Momentum Breakout Indicator Analysis & DX Momentum Strategies Signals

ADX is a momentum indicator used to trade indices - ADX Momentum Breakout Indicator.

ADX Momentum Breakout Indicator is used to measure the strength of market trends on a scale of 0 - 100; the higher the ADX Momentum value the stronger the current stock trend. It should be noted that while the direction of the price is important to the ADX Momentum indicator calculation, the ADX Momentum indicator itself is not a directional indicator. ADX Momentum Indicator values above 30 indicate a very strong trending market, while ADX Momentum Indicator values below 20 indicate non-trending market or a ranging market.

Traders use the ADX indicator as a filter along with other indicators to create ADX Momentum Strategy.

Many traders interpret ADX momentum indicator zones turning up from below 20 as an early signal of a new emerging trend breakout signal - while declining ADX indicator levels turning down from above 30 as a reversal of the current stock trend.

ADX Momentum indicator should be used as part of a system that includes the +DI and -DI lines. Most platforms integrate the original ADX Indicator with the +DI and -DI indicators -DMI Index and collectively refer to the whole indicator system as the ADX Momentum Technical Indicator.

In the ADX indicator examples explained and illustrated below:

ADX Momentum Indicator is the light green line

+DI is the blue-line - bullish line

- DI is the red-line - bearish line

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Bullish Trend - when the +DI, blue-line is above the -DI, red-line

Bearish Trend - when the -DI, red line is above the +DI, blue line

ADX Momentum Strategies Guide

A bullish stock signal is generated when +DI line is above the -DI line, when the blue line is moving above the red line.

To identify a strong bullish ADX Momentum Break out trading signal we wait until the ADX Momentum indicator values move above 20, & the blue line is above the red line. This is a bullish ADX Momentum Breakout trading signal because the DMI system identifies the signal as a buy, while ADX Momentum indicator levels above 20 shows there is a strong upward momentum trend.

ADX Momentum Strategies Guide

A bearish signal is generated when redline is above the blue line i.e. The -DI line is above the +DI line. A strong short signal will be generated when this bearish signal is supported by an ADX Momentum value of above 20.

To identify a strong bearish ADX Momentum Breakout trading signal we wait until the ADX Momentum indicator values move above 20, and the red-line is above the blue line. This is a bearish ADX Momentum Breakout trading signal because the DMI system identifies the signal as a sell, while ADX Momentum indicator levels above 20 shows there is a strong downward momentum trend.