Jimmy wrote: Mon Dec 18, 2017 9:35 pm
Interesting looking strategy Saranga. I like how you have detailed the photos and also on how you use the ADX.
Thank you for sharing with us
The Average Directional Index, or ADX for short, is another example of an oscillator.
It fluctuates from 0 to 100, with readings below 20 indicating a weak trend and readings above 50 signaling a strong trend.
Unlike the stochastic, ADX doesn’t determine whether the trend is bullish or bearish. Rather, it merely measures the strength of the current trend.
Because of that, ADX is typically used to identify whether the market is ranging or starting a new trend.
Take a look at these neat charts we’ve pulled up:
ADX used on a downtrend
In this first example, ADX lingered below 20 from late September until early December.
As you can see from the chart, EUR/CHF was stuck inside a range during that time.
Beginning in January though, ADX started to climb above 50, signaling that a strong trend could be waiting in the wings.
And would you look at that! EUR/CHF broke below the bottom of the range and went on a strong downtrend. Ooh, that’d be around 400 pips in the bag.
Book it, baby!
Now, let’s look at this next example:
ADX used on an uptrend
Just like in our first example, ADX hovered below 20 for quite a while. At that time, EUR/CHF was also ranging. Soon enough, ADX rose above 50 and EUR/CHF broke above the top of its range.
Tada!
A strong uptrend took place. That’d be 300 pips, signed, sealed, and delivered