Saturday, April 21, 2012

Average Directional Movement Index Rating (ADXR)

ADXR summary

Average Directional Movement Index Rating (ADXR) is a smoothed version of ADX indicator and is used as a rating of the Directional Movement while smoothing out ADX values.

If to compare ADXR to ADX, the smoother ADXR doesn't depend much on fast short-term market turns and reversals, which allows to minimize trading risks when relying on ADXR in the long term.

How to trade with ADXR

When ADXR is above 25 - use a trend-following system.

When ADXR drops below 20 - avoid using trend-following systems, instead use oscillator based systems for calm, non-trending or range-bound markets.

A rising ADXR, with DI+ above the D- indicates a strengthening bullish market.

A rising ADXR, with DI- above DI+ indicates a strengthening bearish market.

A cross of ADXR and ADX lines can also be used for evaluating changes in the market.

 ADXR Formula




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