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Strategies & Market Trends : NetCurrents NTCS
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To: peter n matzke who wrote (7226)6/16/2001 11:04:10 AM
From: Michael Watkins  Read Replies (1) of 8925
 
My favorite three uses for ADX are

1 - Extreme readings (40 - 50 depending on stocks vs futures or daily vs intraday time frames, just a guide) are an indication of a trend end, or an extensive consolidation after a strong trend, being near by. In either case, time to exit draws close.

2 - When ADX is moving up steadily from lower values, trend following techniques are indicated

3 - Also on a similar tangent notice that often if there is a very high ADX, ADX will take a "U" or "V" shaped pattern before the next significant chart point is made

Perhaps my most frequent use of ADX is to look from the point of an ADX peak and follow the decline to the trough as you described - use that section of the chart to locate and identify consolidation patterns. Usually will draw a trendline from the peak down along the decline and the peak and bottom points of the trendline will frequently add some clarity to consolidation zone spotting...
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