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Average Directional Index (ADX)
This indicator shows if a certain vehicle is trending or not. Ranging between 0 and 100. It will go up the more the price is trending, either up or down. The more the price stays consolidated and not trending, the lower the ADX will be.
The Average Directional Index shows trend strength and not the direction of the trend. It signals that price is trending (either up or down) when above 80. So both strong upward and strong downward trend will make the ADX go up.
Use it to determine if something is trending or not and use interpret other indicators accordingly.
Moving Averages will be very useful when price is trending.
Oscillators will be very useful when price is not trending (consolidating).
Define the different levels of trend with the following list:
- 20 or lower, a non trending market
- 20 to 40, a confirmation of emerging trend.
- 40 to 50, a very strong trend.
- 50 to 70, an extremely strong trend.
- 70 and higher, a very rare power trend.
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Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.