What Is The Average Directional Movement Index (ADX)?
The ADX is an indicator used to identify the strength of a trend. The higher the value of the ADX, the stronger the trend. Today, we will explore how you can incorporate the ADX in your trading!
How to use the ADX
Because the ADX determines the strength of a trend, it works best when paired up with a trend-following indicator. Examples of trend-following indicators include the DMI, SMA, EMA, DEMA, Hull Moving Average, MESA, Parabolic SAR, KAMA, T3, TMA, WMA, TEMA, MACD, etc. The ADX often comes together with the DMI (Directional Movement Index), as its the case on Tradingview. We have hidden +DI and -DI in our graph, and therefore we only view the ADX.
Today we have chosen to combine the ADX with the MESA to create an exceptional strategy.
For this example, we have chosen a threshold of 25 for the ADX. Thus, for MESA signals to be valid, the ADX will need to have a value greater than 25. To make the value of the ADX easier to identify, we have added a horizontal line to represent the threshold visually. Therefore, as seen in the graph, each time the pink line is above the black line, the ADX indicates a strong trend.
The MESA indicates a bullish momentum when the cloud turns green. This strategy will only open a position when the MESA is green while the ADX has surpassed its threshold.
To exit positions opened by this strategy, we have used the following settings:
Take Profit 15%
Trailing stop loss percentage 2%, arming trailing stop loss 5%
Stop-loss 4%
You can add these settings to your hopper by going into the config/baseconfig/sell settings.
The ADX is an indicator used to identify the strength of a trend. The higher the value of the ADX, the stronger the trend. Today, we will explore how you can incorporate the ADX in your trading!
How to use the ADX
Because the ADX determines the strength of a trend, it works best when paired up with a trend-following indicator. Examples of trend-following indicators include the DMI, SMA, EMA, DEMA, Hull Moving Average, MESA, Parabolic SAR, KAMA, T3, TMA, WMA, TEMA, MACD, etc. The ADX often comes together with the DMI (Directional Movement Index), as its the case on Tradingview. We have hidden +DI and -DI in our graph, and therefore we only view the ADX.
Today we have chosen to combine the ADX with the MESA to create an exceptional strategy.
For this example, we have chosen a threshold of 25 for the ADX. Thus, for MESA signals to be valid, the ADX will need to have a value greater than 25. To make the value of the ADX easier to identify, we have added a horizontal line to represent the threshold visually. Therefore, as seen in the graph, each time the pink line is above the black line, the ADX indicates a strong trend.
The MESA indicates a bullish momentum when the cloud turns green. This strategy will only open a position when the MESA is green while the ADX has surpassed its threshold.
To exit positions opened by this strategy, we have used the following settings:
Take Profit 15%
Trailing stop loss percentage 2%, arming trailing stop loss 5%
Stop-loss 4%
You can add these settings to your hopper by going into the config/baseconfig/sell settings.