Trading For Beginners » ADX http://www.tradingforbeginners.com Learn to trade Tue, 18 Dec 2012 12:23:48 +0000 en hourly 1 http://wordpress.org/?v=3.0.1 PYRAMIDING WITH THE TREND http://www.tradingforbeginners.com/395/pyramiding-with-the-trend/ http://www.tradingforbeginners.com/395/pyramiding-with-the-trend/#comments Thu, 16 Dec 2010 10:39:02 +0000 admin http://www.tradingforbeginners.com/?p=395 We’re short 1 contract from a few days after the top

This is a good place to add a contract as this market is in a strong downtrend mode

HOW TO TELL A STRONG TREND

Bean Oil is in a strong downtrend mode. The Directional Movement indicator shows this clearly.

The green line ( minus line ) has moved much higher than the blue ( plus line ). The red ADX line is trending higher.(The ADX doesn’t tell direction of trend, but the strength of the trend, a move above 30 is considered a strong ADX trend). The ADX indicator is at 34.00 right now

pyramiding 1 PYRAMIDING WITH THE TREND

4-9-18 EXPONENTIAL MOVING AVERAGES SHOW TREND

The 4-9-18 exponential moving averages are also showing a strong downtrend.

pyramiding 2 PYRAMIDING WITH THE TREND

THE ENTRY POINT

The range on 1/15/03 was
Open – 20.15
High – 20.37
Low – 20.03
close – 20.09

The range on 1/16/03 was
Open – 20.13
High – 20.18
Low – 19.87
Close – 20.12

Todays action 1/16/03 Bean Oil made a new low and a higher close. This is a small pivot higher in a strong downtrend and a trading opportunity. If todays low is taken out that is a point to sell for a continuation of the downtrend

A FEW MORE DAYS RALLY

The 1/16/03 low could be taken out the next trading day – 1/17/03 – or also what happens alot is that the market will rally higher for a few days without trading below the minor pivot low just left behind. This would form a small ourhealthissues.com/product/zithromax/ bear flag on the chart.

However it plays out the point to go short is the 1/16/03 low at just below 19.87.
19.85 would be a good place to short this market as this would take out the low by just a little bit

THE PARABOLIC TRAILING STOP

The parabolic inidcator is a good indicator to use when you enter this trade
The parabolic stop is just above 21.00 right now and will move closer day by day.

pyramiding 3 PYRAMIDING WITH THE TREND

OTHER PLACES FOR STOPS IF WRONG

Other stops to use would be a 3 or 4 day high because in strong trends the market will not take out the high of 3 to 4 days ago. Also if the market rallied for a few days and made a bear flag then if it takes out the 1/16/03 low, the bear flag price high is good to use as the stop.

This is a low risk high profit potential trade. We will be using this a lot in 2003 in the daily commodity newsletter.

Disclaimer – All trades are extremely risky. I am not a financial advisor and there are no specific trading recommendations made in Commodity E-book 2002 material. The E-book and newsletter are for educational purposes only and is not guaranteed. Past Performance is not a guarantee of future profits.

Jims Website

Good Trading

Mark McRae
www.surefiretradingchallenge.com

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ADX (Average Directional Index) http://www.tradingforbeginners.com/259/adx-average-directional-index/ http://www.tradingforbeginners.com/259/adx-average-directional-index/#comments Sun, 07 Nov 2010 10:48:21 +0000 admin http://www.tradingforbeginners.com/?p=259 History
Average Directional Index (ADX) was developed by J. Welles Wilder Jr. and as its name implies attempts to measure the strength of the direction the security is moving in.

ADX is measured in a scale from 0-100 with readings above 25 indicating that you are in a trend whilst readings below 25 indicate that you are not in a trend.

As the scale is measured from 0-100 it doesn’t matter if the trend is up or down, the scale and reading are still from 0-100 e.g. if you were in a strong down trend the reading might be 45.

You might get the exact same reading if you were in a strong up trend.

The reason I mention this is that online pharmacy no prescription many of my students get confused when first introduced to ADX and see the indicator rising as the trend goes down (see chart below).

NL7djadx1 ADX (Average Directional Index)

DJLA

Wilder himself admitted that ”Directional movement is the most fascinating concept I have ever studied” ‘New Concepts In Technical Trading Systems’. Readings of over 60 are fairly rare in my observations and once they are at the extremes can actually mean the direction is getting ready for a change.

My Own use Of ADX

I highly recommend this little technique. You may not get that many signals but when you do they will be high probability. I like to use a 21 period moving average on the time period I am trading.

First the ADX must be 30 or over, no action is taken unless the ADX has achieved this reading.

Next the security must retrace to its 21 period moving average.

Once these two conditions have been met you can enter the market. Once in the market keep two things in mind. Have a tight stop on the initial entry, perhaps above the most recent high or most recent low depending on direction you are trading or even a dollar amount.

Next, be aware of the last high or low once in trade e.g. the ADX has a reading 30 or above, the security makes a high and then retraces to the 21 period moving average. Your first target should be the last high or you should at least pay close attention to what happens to price around that level.

The same goes for the short trade. You have a reading of 30 or above and it makes a new low. It then pulls back to the 21 period moving average and you enter short.

Your first target should be the previous low or monitor closely at that price level.
NL7djmyexamp1 ADX (Average Directional Index)

Good Trading

Mark McRae

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