Trade Stock Indices

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ADX Indices Technical Analysis and ADX Indices Trading Signals

Developed by J. Welles Wilder


This a momentum indicator used to determine the strength of a indices price trend; it is derived from the DMI - Directional Movement Index which has two lines.


+DI - Positive Directional Movement Index

–DI - Negative Directional Movement Index


ADX is calculated by subtracting these two values and applying a smoothing function.

ADX Stock Indexes Indicator Technical Analysis



The ADX is not a directional indicator but a measure of the strength of the indices trend which has a scale of Zero to 100.


The higher the indicator value the stronger the trend.


A value of below 20 indicates that the stock indexes trading market is not trending but moving in a range.


A value of above 20 confirms a buy or sell stock indices signal and indicates a new indices trend is emerging.


Values above 30 signifies a strong trending market.


When ADX turns down from above 30, it signifies that the current indices trend is losing momentum.



ADX combined with DMI


Since the ADX alone is a directionless indicator it is combined with the DMI index to determine the direction of indices.

ADX indicator combined with DMI- Directional Movement Index

DMI



ADX and DMI Index

ADX indicator and DMI Index


When the ADX is combined with DMI index a indices trader can determine the direction of the indices trend and then use the this MetaTrader 5 stock indices indicator to determine the momentum of the prevailing indices trend direction.



Indices Technical Analysis and Generating Indices Trading Signals


Buy Indices Trading Signal

A buy stock indices signal is generated when the +DI is above –DI, and the ADX is above 20


The Exit signal is generated when the indicator turns down from above 30.

ADX indicator- Buy Indices Trading Signal

Buy Indices Trading Signal



Sell Indices Trading Signal

A short signal is generated when the –DI is above +DI, and the ADX is above 20


The Exit signal is generated when the indicator turns down from above 30.

ADX indicator- Sell Indices Trading Signal

Sell Indices Trading Signal

 

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