Hi I was just wondering if anybody uses the ADX indicator and if so how they use it. I've heard it mentioned a lot and was just wondering how reliable a tool it is and what exactly it is used for. Also someone mentioned using a 14 period is good. Does this sound right? Thanks in advance Kiasu Trader
Upper right hand corner of this window: "Search" Search for ADX in the archives and you'll find plenty. JB
Most people use a 14 period adx and watch for extemely high - above 50 readings - to identify turning points of oversold or overbought markets. The other component of most adx graphs is the +di and -di, when they cross they give a bullish/bearish tone. Do a search on google and you will find more thanyou ever wanted.
Here's one guideline I recall reading for a 14 period ADX. Remember, it's just a guideline; if trading were this simple we'd all have taken each other's money long ago. That being said, I'm looking to get yours. Really. Never forget that. So take this with a grain of salt, as with everything else you read, and find what really works in a way you can trust. ADX Direction Usage ------------------------------------ 0-15 ... Up or Dn ... Range, use oscillators 16-20 .. Up .......... Trend - use trend following indicators 21-40 .. Up .......... Ditto 40+ ..................... Be prepared for trend to end 40-25 .. Dn ........... De-trending, use oscillators 24-0 ... Dn ........... Non-trending, use oscillators
Those are decent guidelines -- thanks. The only thing I would add is to look at ADX in weekly, daily and hourly time frames for further insights.
It may be useless to you. I find there are a lot of "disgruntled" traders who always want to say a certain indicator or all indicators are useless. No indicator is perfect. In my OPINION, the trick is to know when to use a certain indicator and when to ignore it, but also to understand that you're probably not going to find anything that is even 90% reliable. And if you do, by all means don't tell anyone about it. On a related note, a fellow trader and I were testing some indicators yesterday. What was interesting was when we used a certain indicator ONLY when certain other market conditions were present (in other words, we put a filter on using the particular indicator), the probability of relying on that one indicator increased dramatically. That's part of the skill of analysis and trading.