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Forex Indicators: DMI/ADX PDF Print E-mail
Wednesday, 07 January 2009 23:13
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The DMI/ADX is actually three different indicators combined to show direction and strength of direction. The first part of the indictor is the DMI (Directional Movement Index). This is divided into DMI+ and DMI-. When DMI+ is over DMI- then bias is up, the opposite holds true for DMI-. ADX (Average Directional Index) is used to define the strength of the move. Generally defined as follows, an ADX over 40 defines a trending market and an ADX under 20 defines a ranging market. Between those two points is generally thought of as a transitional market.

forex daily chart

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Looking at the above example you can see that trading the ADX/DMI is rather straightforward. The only clarification that should be added is that a break of support or Resistance should accompany the break out of the ADX above 40.

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