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Hi Gerard,
The example you showed is during a pretty darn good uptrend. ADX is
one of the better indicators ever created, IMHO, and as you have
seen, when a strong uptrend pulls back, the odds are very strongly in
favor of a resumption of that trend.
The period of time you posted shows a *really* strong ADX(14), the
lowest dip just barely getting under 30. This in itself is a very
strong measure of trend strength.
What you are seeing on the "double dip" days appears to me to be much
more indicative of a long entry the closer +DI has come to touching
-DI. When they are far apart, mean reversion would indicate a higher
probability of that knock-out correction you want to enter on. Again,
this is in keeping with the idea that a trend takes a breather, but
doesn't really reverse -- until it's not a trend anymore. You have
to be wrong at the end, but you are right the rest of the time.
The spikes on -DI in a strong trend, like you posted, are entry
signals -- when they reverse. The only problem is making sure you
have a real spike. You seem to have a good momentum indicator (in
black) to go with this. Notice that on the minor -DI spikes and
reversals, that black level is still rather high, telling you that
you're not really in a prime entry spot at that time. But when your
momentum gauge goes below zero, all the -DI spike-reversals seem to
show good entries. I'm not surprised, since they also correspond to
a good convergence of +DI and -DI.
Other periods of ADX are useful as well ...
Yuki
Friday, June 2, 2006, 10:15:37 AM, you wrote:
GC> Hi all
GC> I noticed recently that often +DI & -DI both DECREASE on the day
GC> a possible entry is signalled, by price action or another indicator.
GC> (See the attachment)
GC> This is not always the case as shown here but it appears to be much more
GC> than just a coincidence.
GC> Anyone have any insights?
GC> It does happen on other occaisions ? Could this perhaps be used as an
GC> indication of trend strength, usable when holding a position?
GC> I am aware that one of the ADX nuances is to look for an entry when the
GC> ADX is above both the +DI and ?DI.
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