ADX Average Directional Index Indicator Explained +DI -DI


ADX Average Directional Index Indicator Explained +DI -DI — with David Moadel trunk hello friends and welcome to looking at
the markets with David Modell would you like an indicator that tells you not so
much the direction necessarily of the price
action but how strong that trend is well I’ve got something for you today it is
the ADX or average directional index let me tell you about it ADX is not a trend
Direction indicator it is only a trend strength indicator it tells you how
strongly the price is moving in a direction but not what that direction is
in other words doesn’t tell you whether the price is moving up or down now the
reading of the ADX can be anywhere from zero to a hundred so it’s an oscillator
it bounces between 0 and 100 anything below 25 suggests that there isn’t much
of a strong trend while anything over 75 suggests an extremely strong trend so
let’s take a look at that and there’s a table here ok so if the ADX value is 25
or less that would be an absent or a weak trend 25 to 50 is a somewhat strong
trend 50 to 75 a very strong trend and 75 to 100 would suggest an extremely
strong trend again it’s not telling you whether it’s trending up or down just
how strong that trend is now people sometimes ask me whether these
indicators can be used for stocks or what well this is one of those
indicators I believe you can if you want to use it for stocks commodities crypto
currencies pretty much whatever you like whatever asset class you feel like using
but use your own discretion make your own decisions always all right so let’s
take a look at an example now this is from stock charts
dot-com and also people ask me whether it can be used for day trading swing
trading again you have to make your own decisions but I believe it can be used
for either one because it’s really just telling you how strong the trend is and
like many indicators it adjusts to the timeframe so in this case it’s a daily
candlestick chart for Apple stock and so this might be used for swing trading
rather than for intraday trading and it’s very unusual to see an indicator
where clearly the trend is down and yet the line is going up and then clearly
the line is going up but the trend is going down it’s a little strange looking
and you might have to get used to it but again it’s possible for these two to
either go in the same direction like over here or for them to go on opposite
directions talking about the the price action and the ADX line can go in this
in opposite directions or over here they’re going in the same direction it
can go either way because it’s not telling you the direction it’s only
telling you that the strength of the trend and we can see during the big
correction at during quarter four of 2018 the trend was getting stronger and
stronger downwards and so there was a pickup in strength of the trend as you
can see here indicated here and then over here again you know it started to
go back up slowly slowly and gradually and that started to pick up strength as
you can see over here with the ADX line going up over here okay now if you want
to also include a trend direction indicator okay so if you want to add
something that will tell you the direction not just the strength you can
add something you can add a positive directional movement line or plus di
which indicates the amount of buying pressure and you can add also a negative
directional movement line or negative di which
indicates the amount of selling pressure so you got your plus di and your minus
di so a plus di line above the – di line means that there is more upward movement
than downward movement and conversely a plus di line below the – di line means
that there is more downward movement than upward movement now some traders
will use the plus di line crossing above the – di line as a buy signal and they
might also use the plus di line crossing below the – di line as a sell signal
alright so that might be confusing until we look at it alright so here we have
the it’s Apple stock again alright so it’s the same chart here and the same
ADX line remember back here okay you’ve got the ADX line in black here alright
look at that shape and then you go down and on stockcharts.com
you can have the ADX with the plus di and the minus di lines on there so yeah
same black line here but notice that the plus di line which indicates how much
buying pressure there is that’s in green here that’s the green line and there’s
also the – di line here which is in red and that indicates how much selling
pressure there is and notice that the plus and minus di lines move opposite to
each other of course the buying pressure in green and the
selling pressure in red and so with all three of these lines on here
you have the black line telling how strong the trend is and the the green
and red lines indicating the direction of the trend and as I mentioned earlier
when you have the plus di line the green line
crossing above the red di line that – di line that could be used as a buy signal
if you want to and then when it crosses back below which it looks like it’s
about to do here that could be a sell signal or even a possible short signal
because the indication here the suggestion and by the way this does not
work 100% of the time all right and none of these indicators work 100% of the
time as far as I know but the cross above could be an indication that the
trend is turning and it certainly worked here I mean the crossover happened here
and it was lots of upside and apple from there all right it will will this
indicate if this crosses below which it looks like it’s almost doing here would
that indicate a reversal in the trend it possibly could all right so I hope that
was all helpful to you that could be found that this indicator people often
ask me where you know can I send them the indicator well I can’t send it to
you but you can go to stockcharts.com or whatever your trading platform is and
look for the ADX or average directional index and if you want to throw on the
plus di minus di lines you can certainly do that that’s optional I hope this was
helpful to you if you like this video if it’s helpful if you want to see more
videos like this then please give this video a thumbs up on YouTube and leave a
comment if you want to let me know what you think of the average directional
index and if you have not subscribed to my youtube channel why not do that right
now okay and also hit that notification bell on youtube so you can get an update
whenever new videos like this are published and also if you’re interested
in trading in help or coaching for your trading or investing or if you want some
help putting together your own trading or investing plan you can email me I do
offer coaching if you want the coaching you can email me at David Modell at
gmail.com hey thanks a lot I really appreciate it I’ll talk to you again
soon my

12 thoughts on “ADX Average Directional Index Indicator Explained +DI -DI

  1. Another smashing like button indicator so many great indicators u educate me one note is this quite different than ATR which one would u use more anyway great content!!! Have a great Aloha spirit week Mahalo from Jawaii

  2. i do like all indicators u teach i wonder this is much different than ATR?? Almost 40k subscribers idk why but i am counting down for u lol Mahalo

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