ADX CFDs Analysis & ADX Signals

Developed by J. Welles Wilder

This a momentum indicator used to determine the strength of a cfd price trend: it is 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 and applying a smoothing function.

The ADX is not a directional indicator but a measure of the strength of the cfd trend which has a scale of Zero to 100.

The higher the indicator value the stronger the trend.

A value of below 20 indicates that the cfd market isn't trending but moving in a range.

A value of above 20 confirms a buy or sell cfd signal & indicates a new trend is emerging.

Values above 30 signifies a strong trending market.

When ADX indicator turns down from above 30, it demonstrates that the current cfd trend is losing momentum.

ADX combined with DMI Indicator

Since the ADX alone is a directionless indicator it's combined with the DMI index so as to determine the direction of the cfd.

DMI

ADX and DMI Index

When the ADX is combined with DMI index a trader can figure out the direction of the cfd trend and then use the this indicator to determine the momentum of the prevailing cfd trend direction.

CFDs Analysis & How to Generate CFDs Signals

Buy Signal

A buy cfd signal is generated when the +DI is above -DI, and the ADX trading indicator is above 20

The Exit trading signal is generated when the indicator turns down from above 30.

Buy Signal

Sell Signal

A short signal is generated when the -DI is above +DI, and the ADX trading indicator is above 20

The Exit trading signal is generated when the indicator turns down from above 30.

Sell Signal