Good morning,
This discussion about ADX/ADXR has come into a perfect time slot for me. I have just completed the first reading of that chapter and started thinking how I could integrate this into use. The remarks in the posts have been most interesting.
Wilder states (p. 45) that ADXR must have a minimum fluctuation even when directional movement changes direction. As it is an average of values that span quite a long period, I suppose that it might also smooth out such shorter-term ranging behaviour that ADX would notice and would be essential for some other system.
ADX, on the other hand (still on p. 45), measures movement around the equilibrium points, and its trend should also reflect changes of direction. I would conclude from this that from ADX and +/-DI it should be much easier to see or forecast when a trend changes direction, whereas ADXR might keep you in a trade too long.
Personally I would be biasing towards using ADX, not ADXR. What comes to Dale's "VIP" "Light Bulb" conclusion, I would be one to agree. I might extend that by the following: If you use CSI, use ADXR for ranking the instruments to trade with. But when then applying the other systems, you could apply ADX there to get the best out of them.
My initial speculation here is not based on proper experience about ADX/ADXR. But this is boosting me to integrate these indicators into my small program and do some analysis together with VS. I'm starting to believe in a hypothesis that ADX and +/-DI might be a good filter for entering VS trades. I must also study it with respect to the exit and Dale's ideas about VSTOP. I would also like to see the impact of the used period length and whether the pairs behave differently with respect to it.
J.
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