I hate this blasted ADX indicator but I am determined now learn it through and through. I like the idea of it, but my problem is that it lags so much by the time it registers as a trend, the trend is actually just about over and a new one starts while the indicator decreases.
So here I have another question: Clearly in the image there is an uptrend and a rather strong one at that but the adx is still below 20 or now has just gone above it to 24. It’s set to 14 candles but clearly the trend is more than 14 candles. Why does this happen?
If you set ADX to a lower number of candles, then it will show a trend. Basically a lower number of candles = more sensitivity. By looking at the chart, the last 14 candles have been pretty much flat.
There are many different ways of measuring a “trend” besides ADX. I personally think ADX is a poor indicator for identifying trends. It might tell you the market is trending, but it won’t tell you the direction or the strength of the direction. It’s better used to identify ranging conditions since ranges don’t have a direction. Just my opinion.
I found an oscillator like RSI to be better for measuring trends since not only does it tell you the direction of the trend, but also it’s strength. e.g. if RSI > 50, the market is slightly trending bullish, if it’s > 60 it’s very bullish, if it’s > 70 then it’s extremely bullish.
yeah I have tried to set the ADX at different amount of candles but if I go lower it seems that it is always above 20, which I think sort of defeats the purpose. Is there a method of knowing what the setting should be at a certain time frame?
Your ADX seems to be missing 2 very important components -DI and +DI
by measuring peaks and valleys in them you can filter out the valid moves from all the false signals
Also as silly as it would seem ADX works the best in consolidation periods not in trending market conditions.
You have to find a consolidation pattern and when there is a breakout from the pattern - THEN you take a measurment from your ADX and -DI ; +DI to get validation about the breakout
Also the 25 and 70 level are just a part of the beauty of this indicator. More important is the slope measurment from session to session - for example when you get a higher high in price but adx have sloped down, it could indicate the price exhaustion.
And the last but not the least - ADX works SOOOO much better when used on larger timeframes - Daily, weekly, and monthly is the way to go with ADX
I was looking for the DI+ DI- and it does not seem to be there. Also I am trading on a low time frame (15m,5m,1m) and the ADX is always high and if I incrrease the bars to look at it’s simply too slow. On a short trend of 5 candles on the 15 min chart, it shows that it is high when it already missed those 5 candles and is in the middle of a consolidation. So for that I lowered the candles to get a better response time. It’s good for really large trends down/up; ones that last 2 days but shows sometimes 90 on the ADX scale. On the above chart, it actually broke the trend almost 2 hours after posting the chart on here. If you look at the ADX it’s already at 30. It didn’t start until it was at 45. I’m mainly using ADX to tell me where a break will happen. I was thinking of using a combination of ADX + bollinger band deviation, not so much for the divergence but for the convergence. That way I can at least see that energy is building up and use the ADX as a confirm. What do you think? Is the numbers in an ADX set in stone or like you said above the real idea behind it is the slope?
If you really want to understand and learn how to trade ADX, here’s a book that explains every little detail there is to know about it - ADXcellence: Power Trend Strategies by Charles B. Schaap
