Is this the best indicator for trend traders? Lets see.
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In this video you will learn about the average directional index indicator, and the DMI indicator. It is pretty popular among the new traders, because it not only shows the strength of a trend, but also the direction of the trend.
And if you have been trading for a little while, you might have heard the phrase "trend is your friend". It makes sense, because trend can help you make more money. This indicator can help you with that. ADX is a really old indicator, invented in 1970s. It was invented by a man called J Wells Wilder. Who also made the ATR, and the RSI indicator. So, stick around, because this might be the indicator that will improve your trading strategy.
Now, i usually test these trading indicators 100 times, to show their real probability, since no one that i have seen, talks about their real win rate. If you want to see this indicator, or any other indicator tested 100 times, to make sure it makes money. subscribe now. Maybe check out the other indicator videos that i tested hundred times.
In this video, I'm going to explain the ADX indicator, instead of testing it hundred times. I will do that in a separate video.
When ADX is showing a value below 25, and your other indicator is giving entry signals, do not take trades. Only take trades when the ADX is showing a value of 25 and above.
If you don't have any other indicator to use with the ADX, don't worry. Because there is another version of the ADX indicator, called the DMI.
If you plot the DMI indicator on trading view, you will see, it also comes with the ADX indicator. Furthermore, it comes with two other lines, called the positive directional index, and the negative directional index.
Unlike ADX, this indicator will give you entry signals, and will also show the strength of the trend.
On this chart, the ADX is the pink line. The Blue line is the positive Directional index, and the orange line is the negative one.
If blue line, is above the orange line, the market is considered to be in an up trend. Similarly, If the blue line is below the orange line, the market is considered to be in a downtrend.
Some use the crossover of these positive and negative Directional Index lines, to take trades. When the blue line is crossing below the orange line, it's a sell signal. And, if the blue line is crossing above the orange line, it's a buy signal.
Personally, I don't recommend trading this way, especially if you are a beginner. It works if you take more profit than your risk. But the DMI indicator will give a lot of false signals. How many? Well, we will find out the real win rate of the ADX and DMI strategy, in the next video, when i test it 100 times.
Until i test it 100 times, I don't recommend you to trade using ADX, or DMI indicator alone. Use it with other indicator that gives entry signals. Like the MACD indicator. When i tested it 100 times, it had a good win rate. Check that video out, if you want to know it's real win rate.
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Adx Average Directional Movement Index Dmi - Best Indicator For Forex And Stock Market?, Trading Rush