Advanced ADX Indicator For MT4
When legendary technical analyst J. Welles Wilder came up with the Average Directional Movement Index (ADX) in 1978, it forever changed the rules of the trend trading game. Until the ADX made its entry, traders used to rely on different moving average curves to isolate the trend in a market. But moving averages suffered from some serious drawbacks. It was not only a lagging indicator, but also didn’t have any quantifiable mechanism to detect the strength of a trend. ADX overcame both of those limitations to quickly become the trend indicator of choice of millions of trade from across the globe. The Advanced ADX Indicator For MT4 is a further refined version of J. Welles Wilder’s ADX that makes it comparatively easier for traders to interpret the indicator values, facilitating faster trading decisions.
Overview of Advanced ADX Indicator For MT4
In his book, New Concepts in Technical Trading, Welles Wilder first put forth the idea of ADX, DMI+ and DMI- indicators. The ADX is a pure trend strength determination indicator, while the relative positions of DMI+ and DMI- signal whether the trend is bullish or bearish. However, what began to pose a serious challenge to short term and ultra short term traders was the fact that they had to track the movement of three separate indicators simultaneously to form a market bias. For them, every split second mattered, and interpreting the relatively complex ADX was proving to be costly. This need for speed led to the birth of the Advanced ADX Indicator For MT4.
The Advanced ADX Indicator For MT4 depicts the traditional ADX in a far more simpler way. It consists of a series of histogram bars, either green or red in colour. Green bars indicate bulls are dominant, while red signals that bears are in control. The indicator is set to a default parameter of 13. Traders can tinker with this number to create an indicator that best caters to their needs. Higher values lead to less whipsaw, but can result in delayed signals.
How to Use Advanced ADX Indicator For MT4
Ahmad Waddah Attar, the creator of the Advanced ADX Indicator For MT4 considers it to be a complete trading system in itself, and has laid down the following buy/sell rules -
Enter LONG When:
- the histogram bar is green and rising.
- once the green bar fails to make a new high, tighten your stop loss.
- exit when the bar colour changes from green to red.
Enter SHORT When:
- the histogram bar is red and rising.
- tighten your stop loss once the red bar fails to make a new high.
- exit when the bar changes from red to green.
Our Take on Advanced ADX Indicator For MT4
After testing the Advanced ADX Indicator For MT4 across multiple assets and time frames, we came to the conclusion that it is not a standalone indicator. A simple strategy would be to first check the Advanced ADX on a higher time frame. If the bars are green and rising, we look to initiate only long positions on our trading time frame. Conversely, if the Advanced ADX is red and rising on the higher time scale, we look to open only short positions. The exact entry on our trading time frame can be pin-pointed by classical price action or candlestick patterns or oversold/overbought crossover in a momentum oscillator.