| The ADX is an excellent indicator for telling us when to
trade in a trend (use moving averages or similar buy-the-dip strategies), and
when to trade a consolidation (use oscillators). A recent article in
the May 2004 issue of Stocks & Commodities Magazine led me to create an alert in
Ensign that simplifies the process and tells you, relatively easily, which of
your methods to use for current market conditions. Ensign users can download the template here: TRENDFILTER.dat The Filter uses five indicators that are standard for the ADX study in most charting programs. If you use a different charting program than Ensign, you can probably create similar alerts for your charting program. The five alerts are shown below in the key. They appear, in the chart below, along the top of the ADX study pane. Note how some of them overlap in the chart shown below. They can be used to give you a heads up to a change of trend, and to confirm that you are in a trend or just moving sideways. Bars are colored by the histogram of the DI+ and DI- indicators, and can be used for trading when prices are in a trend. Enjoy!
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A key to the indicators:
How they look:
