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Average Directional Movement Index (ADX)

Average Directional Movement Index (ADX) is Today's advance technical analysis | research system. Majority institutional investor following Average Directional Movement Index (ADX) to find out stock market direction | trend.

The Average Directional Movement Index (ADX) determines the stock market trend. You use it to identify trend of particular stock.

Description :

The Average Directional Movement Index (ADX) is represents the momentum and strength of the stock market | stock trend. The Average Directional Movement Index (ADX) generates buy signals when DM+ cross above DM- and gives sell signal when DM- cross above DM+ and ADX line represent strength of stock market | stock trend.

Curving Average Directional Movement Index (ADX) line indicates weakness started in the present trend and raising Average Directional Movement Index (ADX) line represents bullish momentum is strengthening and declines in Average Directional Movement Index (ADX) represents stock market | stock trend is not clear, majority of time stock market you see's in side way and market preparing for new trend.

How to Calculate?

1) Calculate Today's High - Yesterday's High say A
2) Calculate Today's Low - Yesterday's Low say B
3) TempDM+ = A if A>0 otherwise it's 0
4) TempDM- = B if B>0 otherwise it's 0
5) Calculate EMA(14) of A say AA
6) Calculate EMA(14) of B say BB
7) Calcu8late Today's High - Today's Low say X
8) Calculate Today's High - Yesterday's Close say Y
9) Calculate Yesterday's Close - Today's Low say Z
10) TR = Max of( X, Y, Z )
11) Calculate EMA(14) of TR say ETR
12) DM+ = (AA/ETR)*100
13) DM- = (BB/ETR)*100
14) DMI = ((DM+ - DM-)/(DM+ + DM-))*100
15) ADX = EMA(14) of DMI

Note : Here EMA you have to calculate by using Yesterday EMA(14) - Yesterday EMA(14)/14 + Today's TR or Today's DM+ or Today's DM-


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Stock investing using Average Directional Movement Index (ADX):

The Average Directional Movement Index (ADX) generates buy signals when DM+ cross above DM- and ADX near 20 and start to move upward, and parabolic SAR give a buy signal. At this condition you can built long position considering Parabolic point as a stop loss. This condition of Average Directional Movement Index (ADX) represents bullish momentum is strengthening. Using ADX you can manage your portfolio stock investing and 401k investment. ADX with breakout stocks is a real good combination of technical analysis to get best return on your investment. You can use small time frame Average Directional Movement Index (ADX) for stock trading and day trading.

The Average Directional Movement Index (ADX) gives sell signal when DM- cross above DM+ and ADX near 20 and start to move upward, and parabolic SAR give a sell signal. At this condition you can built short position considering Parabolic point as a stop loss. This condition of Average Directional Movement Index (ADX) represents bearish momentum is strengthening.

To get good result with Average Directional Movement Index (ADX) we need to use it with other technical indicators like Moving Average (MA) | On Balance Volume (OBV) | Price Rate Of Change (ROC) | Relative Strength Index (RSI) | Stochastic Oscillator (STO) | Commodity Channel Index (CCI) | Chaikin Money Flow oscillator (CMF). When we use two or three technical indicators and in case of positive divergence and negative divergence it giving real good result, only you need to change time span and find out which is a better pair for you.



  

 

























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