Adx Rules For Trading

ASHOK RULES FOR TRADING 

When ADX is above 25, trend strength is strong enough for trend trading strategies; when ADX is below 25, avoid trend trading strategies.

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When the +DMI is above -DMI, the trend direction is up. When the -DMI is above +DMI, the trend direction is down.

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When the +DMI and -DMI are below 25 and moving sideways, the trend has no dominant direction.

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When ADX is below 25 for an extended period (>20 bars), draw trend lines on price and wait for a breakout.

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In high volatility conditions, DMI crossovers are lagging signals. In low volatility conditions, DMI crossovers are coincident signals

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A valid breakout up requires a new high in price and a new high in +DMI; a valid breakout down requires a new low in price and a new high in -DMI.

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A LONG crossover high signal occurs when a +DMI crossover makes a higher opposite high above 25. A SHORT crossover high signal occurs when a -DMI crossover makes a higher opposite high above 25.

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When ADX is less than 25, enter on breakouts; when ADX is greater than 25, enter on retracements

It follows that the description of an ideal bullish trend sign or confirmation would be: 1. the price is above the Kumo, Tenkan-Sen and Kijun-Sen 2. the Kumo is thick and bullish 3. the Tenkan-Sen has crossed up Kijun-Sen above the Kumo 4. the Chikou Span is above both Kumo, Tenkan-Sen, Kijun-Sen and price The picture of an ideal bearish trend would be: 1. the price is below the Kumo, Tenkan-Sen and Kijun-Sen 2. the Kumo is thick and bearish 3. the Tenkan-Sen has crossed down Kijun-Sen below the Kumo 4. the Chikou Span is below both Kumo, Tenkan-Sen, Kijun-Sen and price