ADX Stocks Technical Analysis and ADX Stock Signals
Developed by J. Welles Wilder
This a momentum indicator used to determine the strength of a stocks price trend: it's derived from the DMI - Directional Movement Index which has two lines.
+DI - Positive Directional Movement Index
–DI - Negative Directional Movement Index
ADX is calculated by subtracting these two values & applying a smoothing function.
The ADX isn't a directional technical indicator but a measure of the strength of the stocks trend which has a scale of Zero to 100.
The higher the technical indicator value the stronger the trend.
A value of below 20 indicates that the stocks market isn't trending but heading in a range.
A value of above 20 confirms a buy or sell signal & indicates a new stocks trend is emerging.
Values above 30 signifies a strong trending market.
When ADX indicator turns down from above 30, it indicates that the current stocks trend is losing momentum.
ADX combined with DMI Indicator
Since the ADX alone is a directionless indicator it is combined with the DMI index to determine the direction of the stocks.
DMI
ADX & DMI Index
When the ADX is combined with DMI index a trader can figure out the direction of the trend and then use the this indicator to determine the momentum of the prevailing stocks trend direction.
Stock Technical Analysis & How to Generate Signals
Buy Stock Signal
A buy signal is generated when the +DI is above –DI, and the ADX trading technical indicator is above 20
Exit trading signal is generated when the indicator turns down from above 30.
Buy Stocks Signal
Sell Stock Signal
A short signal is generated when –DI is above +DI, and the ADX trading technical indicator is above 20
Exit trading signal is generated when the indicator turns down from above 30.
Sell Stocks Signal
