DMI ... ADX?
Forum on trading, automated trading systems and testing trading strategies
Sergey Golubev, 2016.08.10 17:44
Average Directional Movement Index (ADX)
Developed by J. Welles Wilder
The ADX is a momentum indicator used to determine the strength of a price trend; it is derived from the DMI –Directional Movement Index which has two indicators
- +DI- Positive Directional indicator
- –DI - Negative Directional Indicator
ADX is calculated by subtracting these two values and applying a smoothing function, example a function of ten to come up with a 10 period ADX.
The ADX is not a directional indicator but a measure of the strength of the trend. The ADX has a scale of Zero -100.
- The higher the ADX value the stronger the trend.
- ADX value below 20 indicates that the market is not trending but moving in a range.
- ADX value above 20 confirms a buy or sell signal and indicates a new trend is emerging.
- ADX value above 30 signifies a strong trending market.
- When ADX value turns down from above 30, it signifies that the current trend is losing momentum.
ADX indicator combined with DMI- Directional Movement Index
- Since the ADX alone is a directionless indicator it is combined with the DMI index to determine the direction of the currency pair.
- When the ADX is combined with DMI index a trader can determine the direction of the trend and then use the ADX to determine the momentum of the forex trend.
Technical Analysis of ADX indicator
Buy Signal
- A buy signal is generated when the +DI is above –DI, and the ADX is above 20
- The Exit signal is generated when the ADX turns down from above 30.
- A short signal is generated when the –DI is above +DI, and the ADX is above 20
- The Exit signal is generated when the ADX turns down from above 30.
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ADX - Average Directional Index
This lesson describes the ADX with the DI+ and DI- Directional Indicators, and also shows how they are commonly use
As to timeframes (I am not sure that I understood your question in correct way sorry):
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Hello,
We manage a mutual fund and we're tryng to port our strategy to MT5. We cannot find a DMI indicator nor a way to choose beetween different kind of candles (3 minutes, 3 hours...). We are trying to put part of our fund in the signal system but is turning impossible. Can somebody help us?
Greetings,
Miguel