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RTs,
The ADX is a long time favourite of mine. In my view, it is complete
trading system - insofar as a mechanical system can be one.
Most of us here know that a rising ADX indicates the existence of
trended moves. Therefore a turn in the ADX line would signal the end of
trended phase. It has been found that a declining ADX is accompanied
more by a congestion phase than a decline.
I wait for the ADX to drop down below 15 (after it has been part of a
trending phase) and then tie in a signal in the form of a swing low/high
breakout or a trendline cross to tell me when the correction phase of
the stock is over. This helps me time my reentry into the market and I
have found this to have a hit rate in excess of 70%.
I normally take profits on positions when the ADX line turns down on the
weekly rather than the daily charts.
The DI lines are good trade signals but a bit too fast for my style of
trading so I use them more as a reference than for actual trade signals.
Dr. Narayan
Bombay, India.
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