The ADX indicator simply measures the strength of a trend and whether we’re in a trading or non-trading period. In other words, the ADX is a trend strength indicator. This method of technical analysis is used to identify the emergence of strong downtrends and buy signals.
We need to be very careful about how we read and interpret the ADX indicator. It is not a bullish and bearish indicator. ADX’s moving average only measures the strength of the trend.
So, if the price is going UP, and the ADX indicator is also going UP, then we have the case for a strong bullish case.
The same is true if the price is going DOWN and the ADX indicator is going UP. Then we have the case for a strong bearish case.
Add horizontal 25 line to ADX.
Adjust RSI & ADX to use a 20-period indicator setting.
Step #1: Wait for the ADX indicator to show a reading above 25.
Before we even look to see if the market goes up or down, we must first wait for the ADX indicator to show a reading above 25. Based on the ADX indicator trading rules, a reading above 25 is signaling a strong trend and the likelihood of a trend developing.
We all know that the trend is our friend, but without real strength behind the trend, the newly trend formed can quickly fade away.
In order to gauge the direction of the trend, we also need to look at the actual price action. This brings us to the next step of the best ADX strategy.
Step #2: Use the last 50 candlesticks to determine the trend. For buy signals, look for price to develop a bullish trend.
No matter of your time frame, we need a practical way to determine the direction of the trend.
By using a sample size of 50 candlesticks to determine the trend we ensure that we trade in the moment of now. We like to keep things simple, so if the price is heading higher during the last 50 candlesticks we’re in a bullish trend.
Step #3: Buy when the RSI indicator breaks and show a reading above 70.
For our entry signal, we’ll be using the RSI indicator that uses the same settings as the ADX indicator settings (20). Normally the RSI reading above 70 shows an overbought market and a reversal zone. However, smart trading means looking beyond what the textbook is saying.
In a strong trend as it’s defined by the ADX indicator that’s precisely what we want to see. We want more buyers coming into the market.
So, we want to buy when the RSI indicator breaks and shows a reading above 70.
Step #4: Protective Stop Loss should be placed at the last ADX low.
In order to determine the stop-loss location for the best ADX strategy, first identify the point where the ADX made the last low prior to our entry. Secondly, find the corresponding low on the price chart from the ADX low and there you have it your SL level.
Step #5: You determine Take Profit or when the ADX indicator breaks back below 25.
The best ADX strategy seeks to only capture those profits resulted from the presence of a strong trend. Once the prospects of a strong trend fade away we look to take profits and wait for another trading opportunity.
To accomplish this we take profits as soon as the ADX indicator breaks back below 25.
An ADX reading back below 25 suggests the prevailing trend is running out of strength.
Note** The above was an example of a BUY trade using the ADX indicator trading rules. Use the same rules but in reverse, for a SELL trade.
Conclusion - ADX Indicator
The best ADX strategy gives us very useful information because a lot of the time, we as traders don’t want to get into something that’s moving nowhere and not trending in a strong fashion. By applying the ADX indicator trading rules one can take advantage of the strength of the trend and cash in quick profits. The bottom line is that the best profits come from catching strong trends and the best ADX strategy can help you accomplish your trading goals.
We need to be very careful about how we read and interpret the ADX indicator. It is not a bullish and bearish indicator. ADX’s moving average only measures the strength of the trend.
So, if the price is going UP, and the ADX indicator is also going UP, then we have the case for a strong bullish case.
The same is true if the price is going DOWN and the ADX indicator is going UP. Then we have the case for a strong bearish case.
Add horizontal 25 line to ADX.
Adjust RSI & ADX to use a 20-period indicator setting.
Step #1: Wait for the ADX indicator to show a reading above 25.
Before we even look to see if the market goes up or down, we must first wait for the ADX indicator to show a reading above 25. Based on the ADX indicator trading rules, a reading above 25 is signaling a strong trend and the likelihood of a trend developing.
We all know that the trend is our friend, but without real strength behind the trend, the newly trend formed can quickly fade away.
In order to gauge the direction of the trend, we also need to look at the actual price action. This brings us to the next step of the best ADX strategy.
Step #2: Use the last 50 candlesticks to determine the trend. For buy signals, look for price to develop a bullish trend.
No matter of your time frame, we need a practical way to determine the direction of the trend.
By using a sample size of 50 candlesticks to determine the trend we ensure that we trade in the moment of now. We like to keep things simple, so if the price is heading higher during the last 50 candlesticks we’re in a bullish trend.
Step #3: Buy when the RSI indicator breaks and show a reading above 70.
For our entry signal, we’ll be using the RSI indicator that uses the same settings as the ADX indicator settings (20). Normally the RSI reading above 70 shows an overbought market and a reversal zone. However, smart trading means looking beyond what the textbook is saying.
In a strong trend as it’s defined by the ADX indicator that’s precisely what we want to see. We want more buyers coming into the market.
So, we want to buy when the RSI indicator breaks and shows a reading above 70.
Step #4: Protective Stop Loss should be placed at the last ADX low.
In order to determine the stop-loss location for the best ADX strategy, first identify the point where the ADX made the last low prior to our entry. Secondly, find the corresponding low on the price chart from the ADX low and there you have it your SL level.
Step #5: You determine Take Profit or when the ADX indicator breaks back below 25.
The best ADX strategy seeks to only capture those profits resulted from the presence of a strong trend. Once the prospects of a strong trend fade away we look to take profits and wait for another trading opportunity.
To accomplish this we take profits as soon as the ADX indicator breaks back below 25.
An ADX reading back below 25 suggests the prevailing trend is running out of strength.
Note** The above was an example of a BUY trade using the ADX indicator trading rules. Use the same rules but in reverse, for a SELL trade.
Conclusion - ADX Indicator
The best ADX strategy gives us very useful information because a lot of the time, we as traders don’t want to get into something that’s moving nowhere and not trending in a strong fashion. By applying the ADX indicator trading rules one can take advantage of the strength of the trend and cash in quick profits. The bottom line is that the best profits come from catching strong trends and the best ADX strategy can help you accomplish your trading goals.
Comment:
Another day of Bullish continuation -
Comment:
Adjusted SL -
Comment:
Another day bullish. Adjusted SL @ 252.0
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