Average Directional Movement Index (ADX) [Trend] indicator

Average Directional Movement Index (Average Directional Movement Index for short) ADX) — технический индикатор для бирж, в том числе и , the main function of which is to determine trending. As well as . ATR indicator It was created by Wells Wilder and described in detail in his book "New Concepts of Technical Trading Systems.

The ATR indicator is standard for MetaTrader 4 trading terminal.

ADX indicator trading signals

Wells Wilder suggested the use of constituent ADX indicator as a ready-made trading strategy. To determine the trading signal, it is necessary to fix the intersection of the 14-period +DI and the 14-period -DI:

— buy signal occurs when +DI rises above -DI;
— sell signal - when +DI falls below -DI.

For convenience, the +DI and -DI indicators are plotted on top of each other.

Extreme point of the ADX indicator

Since ADX indicator is trending, то появлением ложных сигналов от него – не редкость. Чтобы уменьшить их количество, Уэллс Уайлдер дополнил свою стратегию «правилом экстремальных точек». Принцип прост: когда вы фиксируете пересечение +DI и -DI, нужно отметить «экстремальную точку». В случае появления сигнала на покупку этой точкой является максимальная цена дня пересечения. Если образовался сигнал на продажу, эта точка — минимальная цена дня пересечения.

This extreme point is used by traders as a limiting level for entering the market. After the signal to buy (+DI above -DI) it is necessary to wait for the price chart to be above the set extreme point, only then you should enter into purchase transaction. If the price does not pass the extreme point level, it is better to stay out of the market. Similar rules, but in the opposite direction, will be true for a sell signal.

Formula for calculating the ADX indicator

ADX = SUM[(+DI — (-DI)) / (+DI + (-DI)), N] / N,

где N — количество периодов, используемых для расчета.