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Average Directional Movement Index Technical Indicator (ADX) helps to determine if there is a price trend. It was developed and described in detail by Welles Wilder in his book "New concepts in technical trading systems".

• Binary ADX system is an price action trend following system based on the two ADX arrows indicators.
• Time Frame: M5 or higher.
• Markets: Currency pairs, Indicies and Commodities.

The simplest trading method based on the system of directional movement implies comparison of two direction indicators: the 14-period +DI and the 14-period -DI. To do this, one either puts a charts of onr indicator on the top of another one, or +DI is subtracted from -DI. W. Wilder recommends buying when +DI is higher than -DI, and selling when +DI sinks lower than -DI.

To these simple commercial rules Welles Wilder added "a rule of points of extremum". It is used to eliminate false signals and decrease the number of deals. According to the principle of points of extremum, the "point of extremum" is the point when +DI and -DI cross each other. If +DI raises higher than -DI, this point will be the maximum price of the day when they cross. If +DI is lower than -DI, this point will be the minimum price of the day when they cross.

The point of extremum is used then as the market entry level. Thus, after the signal to buy (+DI is higher than -DI) one must wait till the price exceeds the point of extremum, and only then buy. However, if the price fails to exceed the level of the point of extremum, one should retain the short position.

### Calculation

ADX = SUM ((+DI - (-DI)) / (+DI + (-DI)), N) / N

Where:

N — the number of periods used in the calculation.