I have tested some systems and trading strategies that rely on the ADX indicator, but none of them seem to work
Most of my testing was done looking to buy/sell in strong trends, as measured by ADX(14) > 20-30
Also tried to buy/sell when ADX was increasing (MyADX > MyADX)
I tried to buy pullbacks or breakouts in the direction of the trend
All the systems I tested failed to make money ...
Does anyone use ADX in a profitable way?
I have more or less same experience with ADX. I've made several attempsts to use it as a main signal to enter to a new trend, I've tried to use it as a filter, combined with oscillators, looked at its DI+, DI-, I've thought to use it to try to classify a trendy scenario from a choppy one. But all my results are so far, at best, discretes.
It's curious because there's a short interview to Wilder posted on the web where he says that his best indicator was ADX, even more powerful than RSI.
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We all have our biases/perspectives, on the basis of our own experiences; one of mine is that "relying on an indicator" to decide when to enter trades is unlikely in itself to lead to any steady success.
I think "whether it's rising" is more useful than "what level it's above": buying into an existing trend in which the ADX is above 25 and rising might offer better potential than what you've been trying, perhaps.
Another thing perhaps worth looking at, mentioned somewhere in a book by Linda Bradford Raschke, is ignoring the the ADX "main line" and looking only at the +DI and -DI lines, to lend confirmation to potential trades - not on the basis of which one is higher than the other but at their relative gradients: +DI climbing and -DI falling is said to be good for entering long positions, and vice-versa for short ones.
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I Use the ADX as a refernce tool to get a snapshot of the market but its not a part of my trading style more like and analysis tool. But i do find its more effective on the daily charts as opposed to a 10 min or so.
Tymberline gave you a really good hint. Also google for the old article by Chuck LeBeau where he says that it isn't the level, it is the rate of change. I use DI+ and DI- as a filter on my systems, and have for several years. Usually DI+ is the one with highest correlation to price action, but not always. The constant repetition of advice to trade based on the level of the indicators has made them unattractive, and underused. Also use FatTails version it gives you more options. Just put ADX on transparent and then look at what is going on. Don't force the answer, let it show you what it does, and don't be afraid to adjust the time period for the average. Load up Fat Tails thrust bars, start looking and adjusting and you may be surprised at how powerful those two lines are as a trend filter.
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