ADX Change
––––History & Credit
The idea of ADX change came from a trading book I read by Charles Le Beau and David Lucas (Computer Analysis of the Futures Market).
–––––What it does
The script calculates the Average Directional Index (ADX) and the period to period change. The script calculated 4 conditions:
– ADX accelerating to the upside (color cyan):
ADX>20
DMI+>DMI-
This period's absolute ADX number is HIGHER than pervious' period ADX number
- ADX momentum slowing to the upside (color blue):
ADX>20
DMI+>DMI-
This period's absolute ADX number is LOWER than pervious' period ADX number
- ADX momentum accelerating to the downside (color yellow):
ADX>20
DMI->DMI+
This period's absolute ADX number is HIGHER than pervious' period ADX number
- ADX momentum slowing to the downside (color yellow):
ADX>20
DMI->DMI+
This period's absolute ADX number is LOWER than pervious' period ADX number
–––––How to use it
I combine the ADX Change as a secondary indicator, that confirms my positions. I combine it with other momentum indicators like the TTM Squeeze.
If I am in position and the ADX Change is cyan, I would hold on the position until I see some shift in momentum or ADX change. This helps me hold on to my winners.
For the more advanced traders, it could be used to indicate shifts in momentum and buy points.
