ADX– In contrast of ATR, the ADX is very useful to determine the strength of the trend. The ADX indicator is a simple chart built on values between 0 and 100, within which they move 3 curves:
- A first blue curve (+ DI) indicating the intensity of the bullish move.
- A second red curve (-DI) indicating the strength of the bearish trend.
- The last curve, light gray color, that it is the result of the other two and that it is the real ADX.
Mainly we’ll have two signals:
- Buy: when the indicator moves within 25 area and the + DI intersects from below to upwards the -DI.
- Sell: when ADX indicator moves over 25 area and the -DI intersects from top to bottom the + DI.
DI means directional indicator, which preceded by the sign “-“ indicates, as said, the strength of the bearish trend, and when it is preceded by a “+” sign, indicates the strength of the bullish trend.