ADX Gold Trading Analysis & ADX Trading Signals

Created by J. Welles Wilder

This a momentum indicator used to determine the strength of a xauusd trading 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 gold trend which has a scale of Zero to 100.

Higher the technical indicator value the stronger the trend.

A value of below 20 indicates that the xauusd market is not trending but heading in a range.

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

Values above 30 indicates a strong trending market.

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

Directional Movement Index Technical Indicator

Since the ADX alone is a directionless indicator it is combined with the DMI index to determine the direction of gold.

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 gold trend direction.

Gold Trading Analysis & Generating Trading Signals

Buy Trade Signal

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

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

Buy Trading Signal

Sell Trading Signal

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

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

Sell Trading Signal