The average directional movement index (A.D.X.) was developed in 1978 by J. Welles Wilder as a technical indicator of trend strength in a series of prices of a financial instrument. It is a combination of two other indicators developed by Wilder, the positive directional indicator (abbreviated +DI) and the negative directional indicator (-DI).
Plus DI represents an absolute up movement and Minus DI represents absolute down movement. Here please note that “+” and “-” denotes only upward and downward movement. “-DI” is not a negative number. But a positive number of downward movement. The A.D.X. combines them and smooths the result with a smoothed moving average.
ADX Rating is the average of ADX with a value period bars ago.
ADXR = (adx + adx(-period)) / 2
How to Use
A high value of ADXR indicates a bearish trend. Thus when the value is high meaning buyers are dominant thus a selling signal can be generated.
A low value indicates a bullish scenario. Thus when the value is low meaning sellers are dominant thus a buying signal can be generated.
Building on Mudrex
A low value of ADX indicates a strong seller’s market meaning prices might go up and a buying signal can be generated and vice-versa.
- Buy:- ADX crosses down 25
- Sell:- ADX crosses up 85
- Time Frame:- 5 minutes
- Stop Loss:- 10%
Creating on Mudrex
Components:- To create this strategy we need 2 indicators. One to buy and one to sell.
Running on Binance Futures: BTC/USDT with tick interval of 5m yielded an overall profit of 2.98%
Find out more on the Mudrex Blog.