AVERAGE DIRECTIONAL INDEX
Hello traders, today I will explain you about one of the best indicator (ADX) which is used by many of the traders for both long and short term.
Q) What is ADX?
Ans) ADX indicator tells use about the momentum (how fast the speed of the stock price changes) of stock price whether it will be bullish or bearish and gives a signal whether the stock price will be high or low for a short time or for a long time according to time frame you choose.
Q) What setting to be change in ADX so that it is easier to read?
Ans) There is no need for any change in the setting. If you want to change the colour of ADX line then you can choose your favourite colour by clicking on style at the top of the box. According to Trading View
Q) How to read ADX lines?
Ans) ADX indicator has various ranges but most of the stock moves between 10 (lower most point) and 60 (upper most point). If the ADX line point upward and start rising upward then it is a signal of strong bullish or bearish movement. If it reaches to the highest point and then from there it started coming down then it tells us about the reversal of stock price from bullish to bearish or from bearish to bullish. If the ADX line becomes straight then the stock price will consolidate and during that period we should not trade unless there is a breakout either above or downward the consolidated candles.
Q) During which time frame should we use ADX?
Ans) For day trading (in nifty and bank nifty) or intraday use 5 minutes and 15 minutes. For swing trading use 1 day. Avoid using this indicator in 1 minute’s time frame because it is not so accurate.
Q) When to wait even if the ADX given the signal to buy or to sell the stock?
Ans) We should not trade in the market if the ADX line is near or below 20. We should get ready to buy or sell the stock only if it value rises above 20. But always wait for a conformation because it may sometimes give a false signal. We should only buy or sell the stock only if it value rises above 40.
Q) Sometimes there is a false Indication in ADX so how to make it more accurate?
Ans) But sometimes there is a false movement in ADX so do not only use it as the only indicator for the stock price. I suggest you to use the indicator Pivot Points and RSI with ADX. By using this it will save you from false indication of ADX.
I WILL ALSO POST THE BLOGS ON RSI AND OTHER INDICATORS
It is only for educational purpose which I have studied and test in the market. Any decision you take during the market is your own responsibility.