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-
Step 1: Start with the strength of the Trend. If there is no trend don’t trade
How to Measure Trend?
Step 1 Use ADX to Determine Trend
0 -10 – No Trend – No trade
10 -20 – Transition
20 -40 – Trending
40+ – Exhaustion
Step 2 Use Di- and Di+
Sellers are in charge or if Di- is above Di+
Buyers are in charge if Di+ is above Di-
Step 3: Combine the ADX (Trend strength with the Di+ and Di- Direction
Putting it all together
Look at chart ADX – you see it moving up to 20 area
Now look for Di+ crossing over the Di- line
That is your buy indicator
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
