The ADX indicator is a well-used indicator trend among traders. It is highly rated for its ability to provide accurate information about speed and gravity. This article analyzes the components of ADX and goes further methodologically to outline how they can be used.
The ADX indicator is made up of 3 lines. These include the main ADX line which is usually black and 2 DI lines one of which is usually green and the other is red.
Understanding the ADX line is important. Its strength is usually determined by various factors. On the one hand, a rising ADX means the trend is getting stronger. Conversely, when a trend is seen to lose momentum or reverse, the ADX is generally downward. A lateral movement shows a flat ADX.
ADX does not show trending direction. The ADX only says how strong the trend is and whether the trend is losing strength.
The threshold of ADX is also very important in shaping the trend. Threshold works in many ways to determine the strength of a trend. For example, if the ADX window falls to the 20.00 level, it indicates that it is equal. However, anything below this figure means that prices are in the range ৷ To see this, one needs to plot a vertical line in the ADX window at level 20.00. The best position will be when it appears at the top because it signifies a great force that will probably continue.
About DI Lines
On the other side of the ADX indicator is an additional two DI lines. The red and green code DI lines are essential for ADX function in many ways. In addition to showing measurements of trend strength, they are also known to provide directional information. To enable the provision of trend information, these green and red DI graphs are usually calculated in a special way. Primarily, DI lines always compare ADX’s absolute candle high and low. The Forex ADX strategy is illustrated below.
? The rise of Green DI is an indication that the previous candle was lower, higher / lower than the current candle.
? If the red DI increases, however, it shows that the previous candle had a higher, higher / lower for an inner bar than the current candle.
? However, when DI indicates 0, it is a way to indicate that both high and low did not take any direction, but fell in the previous candle.
About DI crossover signal
In this case, ADX uses signals to show the strength of the trend. For example, a signal is given at any time if the DI signal is not parallel. An uptrend is usually detected when the red DI line crosses the green DI line. The uptrend in this case means that both the high and low of the previous candles are moving at higher speeds. However, in an inverse situation, it shows that the lower and the higher are thus descending; Prices are falling with previous candles.