January 13, 2005 Is ADX the best technical indicator?
Here is a link where people are talking about ADX (Directional movement indicator), they are saying that ADX is probably the best indicator that can be used for scalpers, day traders, swing traders an even position traders.
The first thing I did after reading this thread, is creating a trading system based on this indicator and back-testing it. The problem is I don't have tick data, so I used end of day data, and came up with very nice results, so I really suggest you to consider the ADX and to do your home work (back-testing).
ADX was developed by J. Welles Wilder in order to evaluate the strength of the current trend.
It is an oscillator that fluctuates between 0 and 100. Below 20, it indicates a weak trend and while above 40, it indicates a strong trend.
Another two indicators come with ADX, they are called the Positive Directional Indicator (+DI or PDI) and the Negative Directional Indicator (-DI or MDI). +DI measures the force of the up moves and –MDI measures the force of the down moves. There is a lot of use for this indicator, some people suggest buying when ADX > 40, others when ADX is rising and PDI above MDI…
Theses indicators can be easily used while day trading and seems to provide good results. (At least making a back-test using end of day data give me great results). Some traders suggest this indicator to Trade-Ideas support, and I think it will be added in future updates.
I am sure it will be a great addition and I will be the first person to simulate all trades based on this new ADX alert.