[Tams]

put a 50+ MA on it...
when the ADX breaks, it will most likely break in the direction of a medium term MA.


may I recommend this MA with extension:
http://www.traderslaboratory.com/for...sion-5642.html

[snowbird]

50 MA should definately help.... and also keep you out of some bad trades (pass on signals or be very carefull if the 50 MA is flat/directionless)

snowbird

[thalestrader]

Originally Posted by daedalus »

These examples will be nothing more than trendline breaks snapped to a Pivot High/Low reading on the charts. Entries on breaks of the trendlines with the ADX < 20. NOTHING ELSE ... In fact this is exactly how I trade from here. ADX and trendlines. Call it a day and make money. Only we can complicate the hell out of it "looking for the trend".

Hi there,

Interesting post - I have a few questions:

1) Are you still trading this way?

2) If yes, have you tried just using trendlines and dropping the adx altogether? What I am getting at here is do you think that the adx reading has anything to do with the the price movement subsequent to the trendline breaks?

3) In my opinion, trading properly drawn trendline breaks is an excellent trading strategy. From the charts you posted, it seems that you are not consistant in the manner in which you select your pivots on which to anchor your trendlines. So my question here is how do you determine which pivots you use to draw your trendlines.

Thank you,

Thales

[ckait]

Are you aware that the adx only told you what happened before and not what will happen in the future? Do you use support and resistance in your trading? By what means do you determine what will be support and resistance? If not the road to riches will elude you longer than your account will last,(in most cases anyway).There is no easy trading method. If there was everybody would do it and it would no longer work. The markets work on pure supply and demand. If you can figure out some kind of an edge to guage a short term imbalance between the supply and demand then you would be able to make an informed trading decision. Keep looking but look inside the price and yourself not the list of canned indicators and holy grails.good luck

[Tams]

Originally Posted by ckait »

Are you aware that the adx only told you what happened before and not what will happen in the future?....

Most indicators do that -- tells you what happened before.
That doesn't mean it provides no useful data.


Just like the speedometer in your car, it is telling you what happened before.
When you are speeding toward a tight curve... what happened before can tell you what is going to happen soon.

;-)

[Frank]

ADX measures past directional movement but has a kind of funky aspect to the calculation...

ADX(14) doesn't look back over the past 14 bars and compute -- it instead uses the raw reading from the last bar and weights it 13/14 --- then takes the current bar DMI and weights it 1/14.. For this reason, going from low to high ADX (or vice versa) is actually a very slow indicator and not all that useful, imo. I think it is much better to understand what makes ADX go up and down and think about what will have to happen to get ADX to move in the future.... ie, one big bar with strong volume could kick-start it if ADX was low --- or a pattern of higher highs and higher lows would do it if done over a 14+ bar sequence.

I find that you should simply look at the bars and see if the high or lows of the bars are being consistently taken out of not. higher highs and higher lows will make ADX go up. lower lows with lower highs will make ADX go up. but another way ADX can go up is if you simply going up slowly but there is little movement below the bar lows (or above the bar highs).

If you study the calculation from the inventors book (Welles Wilder) -- you can understand why a given price bar is additive or subtracting from the latest ADX reading. This means you have to know what makes +DMI and -DMI go up or down --- and, if the current ADX reading is high --- is it high due to high or low net DMI number.

You can then watch the price bars in real-time and pretty much figure out a more 'real-time ADX' mental calculation and what type of action will reverse that action. I like using trailing high-low channels in conjunction with watching the ADX indicator in the lower pane.

Welles Wilder writes that he chose 14 as his ADX figure because that was basically 1/2 of a month and he was using daily charts. Well, I have found that if you take 1/2 of the 14 figure --- and run a high low 7-bar channel off that, you can anticipate what action is consistent with high or low ADX and what is not.

One other thing, if ADX is at a low level, it won't take that much strong movement to jumpstart ADX cause there is already tight compression and ADX will naturally expand from that low level. Thus, ADX is somewhat mean-reverting to the 20-22 level.

Here is an example from Friday -- 5-min ES chart. Note that when a 7-bar high low channel reverses, ADX always drops. When a channel sustains, ADX expands. This obviously isn't rocket science but understanding the nature of the calculation really can help better understand how to use ADX.

I agree with the original poster. Once ADX hits a high or extreme level, the move is 'mature' --- though may still be a continuation trade for a smaller profit target.

[momentom]

Firstly, this has to be one of the best posts I've seen on TL. Thanks Frank.

What follows from this is that the result of correctly following Frank's idea is that you would have the best trade location = tight stop + best r/r.

Taking early aggresive entries more than pays for itself. One of the reasons people lose or get faked out is the less than optimal trade location of their entry. You really need the trade to go your way immediately and not take heat.

[sunilrohira]

Hello,

Does anyone have the .ELD or code for ADX Modified? Thanks in advance.