Best and High Profitable Forex Trading Strategy Based on The Currency Strength – This scalping system is a strategy based on the currency strength (JPY, USD, CAD, EUR, CHF, AUD, GBP, NZD). The best time frame 15 -60 min but this method can also be configured on other time frames.
Average Directional Index (ADX) is used to quantify trend strength. ADX calculations are based on a moving average of price range expansion over a given period of time. The default setting is 14 bars, although other time periods can be used.
ADX can be used on any trading vehicle such as stocks, mutual funds, exchange-traded funds and futures. (For background reading, see Exploring Oscillators and Indicators: Average Directional Index and Discerning Movement With The Average Directional Index – ADX.)
ADX values help traders to identify the strongest and most profitable trends to trade. The values are also important for distinguishing between trending and non-trending conditions.
Many traders will use ADX readings above 25 to suggest that the trend’s strength is strong enough for trend trading strategies.Conversely, when ADX is below 25, many will avoid trend trading strategies.
A common misperception is that a falling ADX line means the trend is reversing. A falling ADX line only means the trend strength is weakening, but it usually does not mean the trend is reversing unless there has been a price climax. As long as ADX is above 25, it is best to think of a falling ADX line as simply less strong.
The series of ADX peaks are also a visual representation of overall trend momentum. ADX clearly indicates when the trend is gaining or losing momentum. Momentum is the velocity of price. A series of higher ADX peaks means trend momentum is increasing. A series of lower ADX peaks means trend momentum is decreasing.
Any ADX peak above 25 is considered strong, even if it is a lower peak. In an uptrend, price can still rise on decreasing ADX momentum because overhead supply is eaten up as the trend progresses.
Knowing when trend momentum is increasing gives the trader confidence to let profits run instead of exiting before the trend has ended. However, a series of lower ADX peaks is a warning to watch price and manage risk. The best trading decisions are made on objective signals, not emotion.
Price is the single most important signal on a chart. Read price first, and then read ADX in the context of what price is doing.
- Candle close above the support;
- MA 100 > MA 200;
- Heiken Ashi gree;
- Trend CCI (14) green bar;
- Trend CCI (210) green bar;
- Oscillator Stochastic Upward;
- ADX Line Upward above 25 line.
- Candle close below the resistance;
- MA 100 < MA 200;
- Heiken Ashi Red;
- Trend CCI (14) red bar;
- Trend CCI (210) red bar;
- Oscillator Stochastic Downward;
- ADX Line Upward above 25 line.
The best profits come from trading the strongest trends and avoiding range conditions. ADX not only identifies trending conditions, it helps the trader find the strongest trends to trade.
The ability to quantify trend strength is a major edge for traders.
ADX also identifies range conditions, so a trader won’t get stuck trying to trend trade in sideways price action. In addition, it shows when price has broken out of a range with sufficient strength to use trend trading strategies.
ADX also alerts the trader to changes in trend momentum, so risk management can be addressed. If you want the trend to be your friend, you’d better not let ADX become a stranger.