Favorite Futures: Index,Currency and Energy futures
Posts: 1,701 since Jan 2010
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Try using the DM indicator together with the ADX multicolor. The DM is much more accurate and useful. When you get a crossover of the 2 lines your have a move up or a move down. See attached chart from 6E today
The Adx indicator is really a function of the DM, so that the DM is more reliable and gives the better signal.
When the Blue is above the Red you have a long, and when the Red is above the Blue you have a short
Another thing is that if the ADX is ABOVE BOTH DM lines we are topping out or bottoming out, and usually when the ADX then turns down, we have the top/bottom. When the ADX is BELOW both DM lines we are in a CHOP mode. Watch these little things as they can give a lot of information of the upcoming price action .
The following 2 users say Thank You to perryg for this post:
As a matter of fact, I do use the DM superimposed on top of the ADX histogram with a setting of 5. The lower threshold is 20 and I don't take a trade unless both the DM and the ADX are above 20.
I notice you are using something called a DMplus. Is this version available on a forum? For some reason, the default DM in NT doesn't seem to plot correctly. I also use Amibroker and there is a difference between the Amibroker and NT DM indicator. I like the appearance of your DMplus.
One of the things I watch for is for the DMI below the lower threshold of 20 to be "flat" or smooth....as the ADX moves up, it forms a sideways "v" with the DMI below the lower threshold. This shows me the breakouts from consolidation. (see attached screenshot)
The explanation for trading the magenta histogram can be found at tradershelpdesk.com. She uses this setup (with her own version of the ADX histogram) and calls it a "free money" trade. It is very accurate.
I am used to trading with the DMI lines instead of a DM histogram (as in the website mentioned above), so that is why I've been searching for better, smoother version of the DMI. For now, I am working with the NT default DM.