The Average Direction Index (ADX) Forex indicator measures trend strength and trend direction at the same time.
Actually, it’s a complete MT4 forex trading system that works quite well.
The rules to buy and sell pairs with ADX goes a follows:
- Open a buy trade when DMI+ (YellowGreen line) crosses above DMI- ( LightSeaGreen line) from below.
- Open a sell trade when DMI- (LightSeaGreen line) crosses above DMI+ ( YellowGreen line line) from below.
The Wheat colored line represents ADX itself and measures trend strength.
As a general rule:
- ADX values between 0-25 represent a weak trend.
- ADX values between 25-50 represent a strong trend.
- ADX values between 50-75 represent a very strong trend.
- ADX values between 75-100 represent a extremely strong trend.
The default ADX period is set to 14, you can change this value by editing the ADX period input parameter.
Feel free to experiment with all input parameters.
You can also use download the Advanced ADX technical indicator.
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Average Direction Index Indicator Chart
Here’s an example of how the indicator should look like when loaded onto the Metatrader 4 chart.
You can apply the indicator to any currency pair and time frame of your preference.
Finding Buy and Sell Triggers With ADX Forex Signals Technical Analysis Chart Indicator
Below is an example of how to buy and sell currency pairs with this Forex indicator:
Buy Trigger: Open a new buy trade when DMI+ (YellowGreen line) crosses DMI- ( LightSeaGreen line) upward. The trend is now considered bullish.
Place a stop loss 2 pips below support, or use your own stop loss strategy.
Exit the buy trade when the buy trend reverses (DMI- > DMI+) or use your own profit target strategy.
Sell Trigger: Open a new sell trade when DMI- (LightSeaGreen line) crosses DMI+ (YellowGreen line) upward. The trend is now considered bearish.
Place a stop loss 2 pips above resistance, or use your own stop loss method.
Exit the sell trade when the sell trend reverses (DMI+ > DMI-) or use your own profit target strategy.
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ADX period, colors, width, style.
The indicator can be used as a stand-alone signals indicator.
It can also be combined with:
- Trading oscillators (MACD, Stochastic, RSI,…)
- Price action methods and techniques
More Info About This Indicator
Tradable Currency pairs: Any
Trading Platform: MT4
Time frames: M1, M5, M15, M30, H1, H4, D1, W1
Indicator Type: ADX
Copy and paste the indicator in the MT4 indicators data folder.
Then restart the MT4 terminal and attach it to any chart.