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Some tips for ADX index that you must know
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ADX has been used in forex market for 40 years and was innovated by J. Welles Wilder Jr. in 1978. ADX, a mixture of two direction indicators including positive direction indicator(+DI) and negative direction indicator (-DI), indicates the trend strength with a simple moving average. Although both +DI and -DI indicate the trend direction, ADX only shows the intensity of trend. Because ADX is a lagging index, it is not an ideal choice to predict market changes, but a way to identify trend strength based on the existing price trends.To get more news about WikiFX, you can visit wikifx news official website.
In a chart, the horizontal axis represents time and vertical axis represents numerical unit. The number of days can be set for all three fluctuation curves, usually 14 days.
1: ADX index is not used to indicate the trend of fluctuations in foreign exchange rate.
2: The entry signal of the ADX index is +DI14-crossing, and the exit signal of ADX index is -DI14-crossing.
3: If the extreme trading rule starts to take effect, the second point will be unavailable to use. If the DI index breaks through, investors can use the extreme end as their own stop-loss point. And if there is no stop effect at the stop point in the next few trading days, investors dont need to worry about the break signal sent out by DI index +again.
4: If ADX is higher than the two DI lines and the direction of movement of ADX line changes, the trend may change, investors can make profits as soon as possible. When the DI line breaks through the stop point, which is when the extreme end causes the stop loss, the final closing can be made.
5: If ADX is higher than the two DI lines, and the ADX value is on the high side, it shows that the current exchange rate trend has been running for some time and is not a particularly good time to build positions, because the trend is likely to change later.
6: When ADX is lower than two DI lines, dont do anything, because there is no obvious trend at this time.
7: If ADX is lower 25, it also means there is no obvious fluctuations trend in exchange rate, you do not need to care DIs position.
8: Generally speaking, ADX represents the strength of trend. No matter which line, +DI or -DI, rises with the ADX, it shows the trend of exchange rate fluctuations by the related direction.
All in all, ADX can reflect forex trend accurately, compared with SAR, ADX can be used more in practice.