DMI/ADX consistently works

Discussion in 'Technical Analysis' started by nyc-hotshot, Aug 22, 2003.

  1. doublea


    I have been watching ADX for a while and I noticed that the DM support and resistance work pretty well too.

    Does anyone has any other observations?

    I'm lookind at the divergence in the DM and price as entry and exit signals. It seems to work pretty well too.
    #51     Aug 25, 2003
  2. Ken_DTU


    hi ---

    right hoodoo, that would likely be useful too, a pv type indicator... since I'm also using adx with the streaming time & sales I see that in motion at the time of entry, eg speed up in the tape and larger avg share size working in..

    right indahook re it's a trend type volatility indicator, basically as long as it's headed up (or holds steady up over 40 area) it tells you volatility and trend is there, which is a good thing..

    right dbp re keep it simple... ADX is simply a good Filter to tell me whether or not there's a volatile trend in place...

    example, eg following a breakout when a stock starts going into a sideways consolidation, the ADX will trend down, since volatility (trend) is flattening out... so that's a good exit signal..

    getting ready for a breakout, as long as the ADX is "in motion" trending up > 40 and is starting to get clear of (over) both the DMI lines, that's a sign of upcoming breakout ...

    for a false breakout filter, I like to say "hey as long as the ADX is chopping around down in the 20ish area and is inside the two DMI lines, the stock's price is not likely breaking out, so I'll wait" type of thing..

    fwiw, ADX is FAR more useful than stochastics in anticipating breakout trends or identifying exit trigger points... stochs, like many oscillator indicators, yield far too many false signals to be very useful for entries.. (and only moderately useful for exits)... MA crossovers tend to be too lagging....

    ADX is a good solid indicator that seems to be a highly useful one.. when combined w/trin, volume and other market internals

    I've abandoned stochs entirely in favor of using ADX, quite some time ago

    hope that helps ---

    #52     Aug 25, 2003
  3. Well, while this is true using only one type of indicator for trading is not a good idea either. You want to have something that would signal that the trend is slowing down or reaching its extremes and it's better be independent of ADX and relatively fast. ADX is rather slow...
    #53     Aug 26, 2003
  4. True. Maybe something that measures a stall in momentum since ADX is a lagging indicator.
    #54     Aug 26, 2003
  5. dbphoenix


    True, electron. Actually, there are several ways of using ADX/DMI. One is as a divergence indicator. My post touched on that and addresses the ADX lag. Another is as a trend indicator, buying when the ADX rises after a basing period. Another is as a "breakout" indicator, such as illustrated by the TEVA post earlier.

    In other words, one has to know exactly what he wants from this. It also helps to know the relationship between the ADX and DMI (i.e., that the ADX is a measure of the distance between the DM+ and the DM-, like the MACD histogram). Simply buying or shorting just because one line crosses another is not likely to bring the desired results.
    #55     Aug 26, 2003
  6. All indicators are lagging indicators for they calculate current price/volume/change/etc. vs. previous/historical. The only indicators that show present changes would be TICK/TRIN.

    TM Trader
    #56     Aug 26, 2003
  7. dbphoenix


    True. However, the ADX lags particularly badly. Which is how the DMI enters into it.
    #57     Aug 26, 2003
  8. I use Nasdaq futures along with the DMI/ADX to signal changes in market momentum and give me an idea when to bail out on a DMI trade.
    #58     Aug 26, 2003
  9. okwon


    So you'll stay with a losing trade as long as the market momentum is still in your favor and wait for the stock to come around? Or do you have a point when you bailout even though the overall market is still going your way?
    #59     Aug 26, 2003
  10. I tried using the ADX and DMI today with my own system. I didn't find the ADX useful, but the DMI crossover can be used as a confirmation with another system. Definitely aint no holy grail though.
    #60     Aug 26, 2003