ADX Commodity Technical Analysis and ADX Trading Signals

Created by J. Welles Wilder

This a momentum indicator used to determine the strength of a commodities 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 2 values & applying a smoothing function.

The ADX isn't a directional technical indicator but a measure of the strength of the commodity 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 commodity market is not trending but heading in a range.

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

Values above 30 signifies a strong trending market.

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

ADX combined with DMI Indicator

Since the ADX alone is a directionless indicator it's combined with the DMI index to figure out the direction of the commodity.

DMI

ADX and DMI Index

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

Commodities Technical Analysis & How to Generate Trading Signals

Buy Trading Signal

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

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

Buy Trading Signal

Sell Trading Signal

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

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

Sell Trading Signal