Average Directional Movement Index - ADX EA Setup - Setting Up Average Directional Movement Index - ADX Expert Advisor

Average Directional Movement Index - ADX EA Setup - Setting Up Average Directional Movement Index - ADX EA - A trader can come up with an Average Directional Movement Index - ADX EA based on the awesome indicator explained below.

Average Directional Movement Index - ADX EA rules can be combined with other Forex trading indicators to come up with other Expert Advisor Forex Robots that trade using rules based on two or more indicators combined to form a trading system.

Average Directional Movement Index - ADX Technical Analysis Signals

Developed by J. Welles Wilder

This a momentum indicator used to determine the strength of a price trend: it's derived from the DMI - Directional Movement Index which has 2 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 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 market is not trending but heading in a range.

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

Values above 30 signifies a strong trending market.

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

ADX combined with DMI - Directional Movement Index Indicator

Since the ADX alone is a directionless indicator it is combined with the DMI index to figure out the direction of the currency pair.

DMI

ADX & DMI Index

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

Forex Trading Technical Analysis & How to Generate Trading Signals

Buy Signal

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

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

Buy Trading Signal

Sell Signal

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

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

Sell Trading Signal