Trading forex adx

ADX: The Trend Strength Indicator

The Average Directional Index , or ADX for short, is another example of an oscillator. It fluctuates from 0 to , with readings below 20 indicating a weak trend and readings above 50 signaling a strong trend. Rather, it merely measures the strength of the current trend. Because of that, ADX is typically used to identify whether the market is ranging or starting a new trend.

Beginning in January though, ADX started to climb above 50, signaling that a strong trend could be waiting in the wings.

And would you look at that! Just like in our first example, ADX hovered below 20 for quite a while. Once ADX starts dropping below 50 again, it could mean that the uptrend or downtrend is starting to weaken and that it might be a good time to lock in profits.

One way to trade using ADX is to wait for breakouts first before deciding to go long or short. ADX can be used as confirmation whether the pair could possibly continue in its current trend or not.

Another way is to combine ADX with another indicator, particularly one that identifies whether the pair is headed downwards or upwards. For instance, when ADX starts to slide below 50, it indicates that the current trend is losing steam. From then, the pair could possibly move sideways, so you might want to lock in those pips before that happens.

We introduce people to the world of currency trading, and provide educational content to help them learn how to become profitable traders. We're also a community of traders that support each other on our daily trading journey.

BabyPips The beginner's guide to FX trading News Trading. How to Trade Forex Trading Quizzes Forex Glossary. School of Pipsology Elementary Popular Chart Indicators.

Average Directional Index (ADX) | Forex Indicators Guide

How to Use ADX Average Directional Index. Partner Center Find a Broker. Support and Resistance Levels.

Privacy Policy Risk Disclosure Terms of Use.