Taking advantage of the strength of the trend by trading with the adx

The ADX (Average Directional Index) is a technical analysis indicator created by J. Welles Wilder and is used to evaluate the strength of an upward or downward trend. The ADX is an oscillator that ranges from 0 to 100, but the trend can be described as strong only above 30 points. The readings above 50 points are very rare and in this case they testify an excessive sentiment to be used in a contrary view. Conversely, all the readings below 20 points indicate a weak trend that could lead to a short-term burst of volatility. Through the use of this indicator, we can understand at what stage of the market we are in at the moment: in trading range or in trend. This is quite an useful element for those who operate on Forex trading. The Adx has to be used together with other indicators, in order to avoid false signals and prevent significant loss of money to Forex trading operators after opening a Forex account. (more…)