ADX Wilder Indicator

What is the ADX Wilder Indicator?

The Average Directional Index (ADX) is a technical indicator developed by J. Welles Wilder to measure the strength of a trend. The ADX is typically used in combination with other indicators to determine the direction and strength of a trend, as well as potential trend changes. The indicator ranges from 0 to 100, with values above 25 indicating a strong trend and values below 20 indicating a weak trend. It is a popular indicator among forex traders as it can help them to determine the direction and strength of a trend, and make better trading decisions.

ADX Wilder Indicator Strategy

  • One of the best strategy that can be used with the ADX indicator is to identify a trending market and then enter a trade in the direction of the trend. This can be done by looking for a value of ADX above 25, which indicates a strong trend, and then using other technical indicators such as the +DI and -DI to determine the direction of the trend.
  • Once a trend has been identified, traders can enter a trade in the direction of the trend by placing a buy order if the +DI is above the -DI, and a sell order if the -DI is above the +DI.

Buy Signal

adx wilder indicator Buy Signal
adx wilder indicator Buy Signal
  • ADX value is above 25, indicating a strong trend
  • +DI line is above -DI line, indicating a bullish trend
  • A bullish crossover occurs when +DI line crosses above -DI line
  • A buy order is placed in the direction of the trend.

Sell Signal

adx wilder indicator Sell Signal
adx wilder indicator Sell Signal
  • ADX value is above 25, indicating a strong trend
  • -DI line is above +DI line, indicating a bearish trend
  • A bearish crossover occurs when -DI line crosses above +DI line
  • A sell order is placed in the direction of the trend

ADX Wilder Indicator Pros & Cons

Pros

  • It helps to determine the strength of a trend, which can be useful in identifying potential trend changes and in making trading decisions.
  • It can be used to filter out non-trending markets, which can help traders avoid entering trades in markets that are not trending.

Cons

  • It does not indicate trend direction, so traders need to use other indicators or analysis to confirm trend direction.
  • It can give false signals in a choppy market, where the trend is not clear.
  • It’s a lagging indicator, meaning it may give signals after the trend has already been established.

Conclusion

In conclusion, the ADX Wilder Indicator is a widely used technical indicator in the forex market that can help traders determine the strength of a trend and make better trading decisions. However, you may want to confirm all signals with additional market analysis. I would be looking at price action including support and resistance levels along with any bullish or bearish candlestick patterns. As with any forex strategy, you should have excellent money management so that one bad trade does not cancel out a consecutive run of winners. You can always practice trading on a forex demo account to begin with to improve your trading skills and build up your confidence. Most forex brokers provide a free demo account, including IC Markets. They are my top choice for both manual and automated forex trading systems. This is because they have tight spreads, quick execution speeds, low commission fees and excellent 24/7 support.

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