Indicator ADX.
A bit of the indicator. ADX acronym stands for Average Directional Movement Index, which translated into Russian literally means the Average Directional Movement Index. Creator of this indicator is to Welles Wilder, who in his book describes in detail the principles of the indicator. Just Welles Wilder defines the main features of the indicator. This is the same as to define a trend (trend), find the optimal time to buy and sell, and to specify the time when you need to take profits (to put it simply close the order.)
Components of the indicator ADX. This indicator consists of three lines. In the settings you can change the display thickness, color, and line type, as in other indicators. The blue line is an indicator of the direction Dl. The red line is an indicator of the direction-Dl. Last, dark green line is the indicator itself ADX.
Description of the indicator. ADX indicator belong to the class of oscillators. This indicator has a scale fluctuations from 0 to 100, but in spite of this fluctuation rarely exceed the mark 60. Creator indicator wrote oscillations below 20 - indicating little trend (better to stay out of the market), and the fluctuations that exceed the 40 - point to the presence of a trend. The feature of this indicator is that values above 40 can point to a strong downward, and on a strong upward trend. From Postal task indicator - not to determine the direction of the trend, and to show that the trend exists. Just the ADX can be used to determine the current market changes. For example, when the indicator data pass mark of 20, then it may be a trend change and symbolize its further development, and when the indicator shows a value below 40, when prices are high, it may mean that the trend is no longer valid.
This indicator was created by Wales Wilder based on two previous indicators. First, it is an indicator Positive Directional (often referred to as his «Dl»), and the second was an indicator Negative Directional (it is referred to as «-Dl»). At the time intervals Dl means a movement upward, respectively-Dl means a movement downwards. The ADX uses the Dl and-Dl, so, as mentioned above, the ADX line does not indicate the direction of the trend.
Use the indicator ADX. Basic signals to buy and sell, is the intersection of lines and Dl-Dl. Buy signal is crossing the line Dl-Dl line from the bottom up, respectively a signal to sell a line of intersection of the line of Dl-Dl. For a trader, it is important to determine the trend in the early stages, in order to maximize profits, so you need to look for currency pairs, where the ADX crosses mark of 20 from the bottom up, and when ADX crosses mark of 40 from top to bottom, this is a signal that the current trend is weakening.
Disadvantages indicator. Often crossing lines Dl-Dl and give false signals to buy and sell. This trend is not due to market conditions, and so it is better not to enter into the market.
This indicator is used to determine the presence of a trend, and to identify entry points and the direction of the trend using other indicators ( Ichimoku , RCI, Alligator ...). Combination of indicators is much more effective than the use of one.