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Forex Bond
If you use graphics, then you are on the strong development of trade - and the average Directional Movement Index Indicator, or ADX, enables you to do so.
Wells Wilder developed the ADX, and outlined in his classic book "New Concepts in Technical Trading Systems".
FOREX Indicator
Let us at this crucial indicator closer - and see how to apply it on your forex charts to give greater accuracy in the preparation of your trading signals.
Determine the strength ofTrend
The ADX is a momentum indicator, which aims to measure the strength trend it - and trying to determine whether the market is trending or sideways movements.
The advantages of the ADX
A premise of technical analysis is that a strong trend in motion, rather than on the back. Therefore, we always want to be trading strong trends - as are your chances of success higher. The average directional movement is an indicator of good - and you should take into accountas part of your currency trading system.
The Technical Bit
For Boffin out there, here's the technical bit - do not worry if you do not understand the calculation is to use easily when presented visually. The ADX is based on a comparison of two different indicators, both of which were developed by Wilder, and are based:
Positive Directional Indicator (+ DI) and the Negative Directional Indicator (-DI), produced by ADX, as shown in the followingFormula:
ADX = SUM [(+ DI (DI-DI ))/(+ + (-A)), N] / N
Where:
N: It refers to the period of calculation. The above formula gives the ADX line, which ranges between 0 and 100 values. The + DI and-DI to be both recognizable and make available the indicator.
You do not understand the above calculation, use the display - you just have to accept that the display works.
The indicator is easy to use, if it is presented visually - and I am registered withmost of the good forex chart services.
Trade with the ADX indicator
The ADX is not a bullish, bearish trading signal generator - and should never be used as such.
The ADX indicator simply shows the strength of the trend - and other indicators to be used to enter and exit trades.
Although the ADX ranges from 0 to 100, rarely more than 60
Use the ADX as follows:
Readings above 40 indicate the strength ofTrend.
Values below 20 indicate phase of consolidation and flat trading range.
You can use the intersection between + DI and-DI to determine the direction of the trend, if + DI-DI crosses up, is a bullish signal, on the other hand, if + DI crosses below-DI is a recurrent signal.
The ADX line is a great momentum indicator and as the RSI (also developed by Wells Wilder), the ADX will help you trade the strongest trends - and give you notice of changesMomentum.
The bottom line
If you want a successful currency trading, you can not just trade support and resistance, and hope to maintain or break. Do you need a confirmation of the dynamics, opportunities to have on your side - and the ADX indicator is happy to help.
The final words
New Trading Systems Technical Concepts was published in 1978 and was one of the first trading period of the books I have ever bought. Each trader needs to book some of its forex education. If you want to learnForex trading the right way, the book and the ADX indicator to increase the possibility of large profits FX.
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