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Here is another useful way to look at it. No decisions should be
based on just one indicator! If someone explains to me how to attach
a chart I can post that too!
ADX <20 indicates a weak trend. Use oscillators
ADX rising from 15 to 25 from lower levels
means the trend is strengthening; use
trend-following systems
ADX above 30 is interpretd as a strong trend;
use trend-following systems
ADX at an extremelyhigh level of 45 or above
is interpreted as a market in a strong trend
with consolidation expected anytime. Start
booking profits if the ADX makes a top or
flattens out.
Long trades can be entered when +DI moves
over -DI and short trade can be entered when
-DI moves below +DI.
Importnt turns are indicated when ADX reverses
direction after it has moved above both DIs
Divergence between the ADX and the price is
an importnt indicator of an impending reversal.
ADX declining below 30 is interpreted as a
consolidation after a trending move. Use
Oscillators or credit spreads to trade these
consolidations. If bearish patterns develop
and break down, look for ADX to move higher,
this time indicating a trending move on the
downside.
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