ADX explanation?
Hello traders, in this post I will give you a good resource for an explanation and interpretation of the ADX indicator. The ADX Average Directional Movement Index Forex indicator was made by Welles Wilder and stands for average directional index.
Adx Divergence
ADX can also show momentum divergence. When price makes a higher high and ADX makes a lower high, there is negative divergence,
The main design of the Forex indicator is to identify the strength of the recent market trend. This is helpful to Forex traders because in a strong market trend, risk is contracted and profit expected is expanded. ADX Average Directional Movement Index is sorted as a momentum Forex indicator that could be applied alongside with many other Forex indicators.
Adx Trading Strategies
Many traders will use ADX readings above 25 to suggest that the trend's strength is strong enough for trend trading strategies.
ADX Average Directional Movement Index is fairly simple to interpret by knowing that the higher the number the stronger the market trend. The ADX Average Directional Movement Index is showed on a Forex chart as a single line with the values ranging from 0 to the highest value of 100. The investor must remember that ADX Average Directional Movement Index is a non-directional Forex indicator.
ADX Divergence
ADX can also show momentum divergence. When price makes a higher high and ADX makes a lower high, there is negative divergence
This means that ADX Average Directional Movement Index will not give you the recent market trend guidance. ADX Average Directional Movement Index shows average range expansion over any given period of time. The default period of time for ADX Average Directional Movement Index on most commercial trading platforms is 14 periods.
