Average Directional Movement Index (ADX) - indicador para MetaTrader 5
The technical indicator Average directional Movement Index (ADX) helps to determine the market trend. Welles Wilder described and developed this indicator in his book "New Concepts on technical trading systems in stock Exchange".
The simplest trading method based on the directional motion system implies the comparison of two direction indicators: 14-period + di and 14-period El-Di. To do this, you can put the graphs of the indicators on top of each other, or you can subtract + di-di. W. Wilder recommends always buying that + di crossover above-Di, and sell when-di crossover above + di.
The simplest trading method based on the directional motion system implies the comparison of two direction indicators: 14-period + di and 14-period El-Di. To do this, you can put the graphs of the indicators on top of each other, or you can subtract + di-di. W. Wilder recommends always buying that + di crossover above-Di, and sell when-di crossover above + di.
In addition to these simple rules, Welles Wilder also proposes the extreme point rule. This rule is used to remove false signals and to decrease the number of transactions. According to this principle, the "extreme point" occurs when + di and-di intersect each other. If + di rises above-Di, this point will be the maximum price of the day when they intersect. If + di is less than-Di, this point will be the minimum price of the day they intersect.
The endpoint is then used as a market entry level. Thus, after the purchase signal (+ di is above-di) one must wait until the price exceeds the extreme point, and only then buy. However, if the price cannot exceed the level of the endpoint, the short position must be maintained.
Calculation:
ADX = SUM ((+ di-(-DI))/(+ di + (-di)), n)/n
where:
N-the number of periods used in the calculation;
Sum (..., n)-sum of N periods;
+ Positive value of price movement indicator (positive directional index);
-Negative price movement indicator DI-value (negative directional index).
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