ADX Usage

[aurora]

I've been looking to incorporate the use of the 20 bar EMA and 14 bar ADX into my trading,i.e the "Holy Grail" technique Linda talks about in Street Smarts :-)

Please can you explain how in the MTP studies window the ADX indicator shows 3 lines. I'm not sure which one to use or how to configure it .

Cheers
Kulvinder

[Tony Beckwith]

Kulvinder

The 3 lines on the ADX study are the ADX itself (always the smoother line) and the 2 other indicators the ADX is derived from - the Positive Directional Indicator (sometimes written +DI) and the Negative Directional Indicator (-DI).

For your purposes, the smoother ADX itself is what you need for Street Smarts work.

Hope this helps

Tony.

[Matt Bowen]

Hi Kulvinder,

This might help as a visual:

[Tony Beckwith]

It's worth adding for the benefit of those of you unfamiliar with the ADX that it's a momentum indicator developed by leading technician Welles Wilder in New Concepts in Technical Trading Systems. It's also sometimes known as the (Average) Directional Movement Index (DMI).

The ADX attempts to measure the extent to which a market is trending. It measures the strength of the trend, regardless of direction; the higher the value, the stronger the trend.

Also, the default period is usually, but not always, 14 bars.

Thanks

Tony.