Another indicator that may catch your eye is the ADX , the strength indicator of the trend.
The MT4 indicator automatically includes 3 lines:
- The Directional Average Index (ADX) itself (thick yellow line)
- Positive Directional Indicator (+ DI) (green line): difference between two consecutive highs
- Negative Directional Indicator (-DI) (red line): difference between two consecutive lows
How to interpret:
+ DI and -DI define the directional movement. In general, bulls prevail when + DI is greater than -DI, while bears dominate when -DI is higher. + DI and -DI crosses make a commercial system in combination with the ADX.
The ADX (yellow line) is used to determine whether the currency pair is showing a trend or not. A strong trend exists when the ADX is above 25 and there is no trend when the ADX is below 20. There appears to be a gray zone between 20 and 25.
The “Buy” signal occurs when + DI crosses above -DI (ADX must be above 25). Stop-loss is usually placed at the low of the signal day. The buy signal remains in effect as long as this low holds, even if + DI crosses down from -DI.