The ADX indicator
You see that a certain couple moved strongly upwards, and then you have analyzed the situation and bought this pair in the reaction. But now, after the next pulse, the couple stopped moving in your direction and moves down, but you do not know enough of this pair of forces to move further up, and you're wondering whether there is a way to measure the forces move prices? So you can get out before that position and protect the most of their profit.
Yeah, ADX indicator way to measure the price movement of force there, and it is measured by an indicator Average Directional Movement Index (ADX). ADX indicator was developed by J. Welles Wilder. ADX designed to assess the strength of the current trend, whether up or down. The important point is that this white light does not give you the direction of price movement and will tell you that the movement is gaining or losing strength. On ADX indicator, there is one main line and two auxiliary ADX + DI,-DI.
Main ADX indicator Line (black) determines the strength of the market, respectively, if its value drops so that the strength of this movement is reduced and it is coming to an end when the value of ADX indicator increased movement has just begun and it is gaining momentum.
+ DI (green),-DI (red)
These lines define which of the two movements (up or down) now measures the main line. That is, if the line is higher than + DI-DI, this means that the ADX indicator is currently measures the upward movement, if the opposite-DI is higher than + DI means that the ADX measures the strength of a downward spiral.
In the picture ADX indicator with standard parameters (period 14, is applied to close) on the daily chart USD / JPY shows the value of this tool. We see that the market moved strongly downwards, whereas ADX indicator and moved up and line-DI was above the + DI. I drew a line on the chart with an arrow showing where the ADX indicator peaked and started to move down. We can also see that this change in trends and changes in the ADX indicator in the direction of USD / JPY. If the market is in a downtrend, ADX indicator is still growing when the price reached its minimum ADX peaked and started to decline when the price began to change direction back up, until the support line is not crossed.
For trend trader, ADX indicator measurement of the pulse can be a valuable tool to assist in determining the end of the heavy traffic. Thus, a trader can open positions in the best time to do so and retain most of their profits in trade.
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