Simple Trading System Using ADX and DMI

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ADX/DMI Details Below Are From:

• A webinar presentation from The Trading Zone / Chart Trading Patterns.  
• These details present a Simple Trading System Using ADX and DMI Indicators

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Chart

• Range, Tick, Volume or Renko chart – all will work for this
• This example 4 Range which means every candle has height of 4 ticks
  •  Tradestation
    • Range = .04
    • Using 1 Tick Interval
  • Ninjatrader
    • Range = 4

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• To get more signals decrease the range value
• To get less signals increase the range value
• Dont use a minute chart
• ADX – Default (14 period)Change from Line Chart to Histogram to differentiate between the indicators when quickly looking
  • 3 Horizontal lines on ADX chart
    • 10, 20 and 40
  • DMI (DI+, DI-) (Default 14 period)
    • Dont use the indicator that has DMI, and ADX together – add them separately
    • DI+ Green Line
    • DI- Red Line

How to use the ADX, Di+ and Di-

1. Step 1: Start with the strength of the Trend.  If there is no trend don’t trade

How to Measure Trend?

1. 1. Step 1 Use ADX to Determine Trend
      1. 0 -10 – No Trend – No trade
      2. 10 -20 – Transition
      3. 20 -40 – Trending
      4. 40+     – Exhaustion
   2. Step 2 Use Di- and Di+
      1. Sellers are in charge or if Di- is above Di+
      2. Buyers are in charge if Di+ is above Di-
   3. Step 3: Combine the ADX (Trend strength with the Di+ and Di- Direction

Putting it all together

1. Look at chart ADX – you see it moving up to 20 area
2. Now look for Di+ crossing over the Di- line
3. That is your buy indicator
4. Now watch ADX – Look to exit when it crosses above 40

• The details above by themselves show a simple trading strategy using ADX and DMI  – but if you want to take it to the next level check out this free video from the Chart Pattern Trading

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• ***Trading involves and is not suitable for everyone.  Past performance is never indicative of future results.  Trade at your own Risk**

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