Need advise on use/behavior of ADX

Hi! Fellas,

How do we trade or we do not trade at all when price is still in consolidation and DMIs start expanding???

Kindly see attached chart for the example and advise me if u trade this particular pattern.... I have observed this kindda pattern many times but never knew how/what to take action on it.

Bests,
Apurv

Hi Apurv,

I have used ADX for the past couple of years in my trading. The particular pattern you have described does indeed happen regularly. It indicates that the bulls are gaining more control over the bears or vice versa. However, I would not trade off it. I trade only when the adx and di is above 20 (some traders use 25) at this point the other di should be pointing downwards. The larger the gap the stronger the move. As the DIs start to move back together this shows the move is weakening.