The Average Directional Movement Index (ADX) is a key technical indicator that helps traders gauge market trends. This handy tool was developed by Welles Wilder, who detailed its use in his influential book "New Concepts in Technical Trading Systems".
At its core, the ADX works by comparing two directional indicators: the 14-period +DI (positive directional index) and the 14-period -DI (negative directional index). You can visualize this by overlaying the indicators on your chart or simply by subtracting -DI from +DI. According to Wilder, you should look to buy when +DI crosses above -DI and sell when -DI crosses above +DI.
But that’s not all; Wilder also introduced the extreme point rule to help cut down on false signals and minimize unnecessary trades. This principle identifies an
Comments 0