ADX Crude Oil Technical Analysis & ADX Trading Signals

Developed by J. Welles Wilder

This a momentum indicator used to determine the strength of a crude oil 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 two values and applying a smoothing function.

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

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

Values above 30 indicates a strong trending market.

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

ADX combined with DMI Technical Indicator

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

DMI

ADX & DMI Index

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

Oil Technical Analysis & How to Generate Crude Trading Signals

Buy Trading Signal

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

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

Buy Crude Trading Signal

Sell Trading Signal

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

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

Sell Crude Trading Signal