ADX How Does It Work

[Boswell]

I'm a newbie trader, and have been trying to read up on what I can. Dipped my toe in the water a little, made some, lost some, but most importantly am trying to learn why I won and lost.

For my personal trading strategy I am looking at mainly trading UK shares in the 350, over a medium 30-60 day period. Cut the losses short and let the winners run. So far I have ShareScope Gold, a great package even if I'm not good on computers. Am presently reading 'The Financial Spread Betting Handbook'. Excellent thus far and understand most of it, but am at a loss on ADX and can't find that on ShareScope. Is it on there and what do the DI+ and DI- mean reading 30 and above

So far my trading strategy is to look at a naked graph to see a trend 9 (bull or bearish, it matters not). Look at different moving averages, 12, and 2 month highs, and lows, volume, trying to read candlesticks, but also want to put in a couple of additional pointers and the handbook recommends ADX, but doesn't go into detail of what it is. Then I tend to go on the net and trawl for information on the perspective company I wish to trade to get some fundermental analysist, and look at how the sector as a whole is performing.

I'm still open minded and haven't ruled anything in or out, but with relitively small bets this year am hoping to get a trading programme that I am happy with.

Any advise out there on ADX, and any comments welcome, no matter how harsh, I'm thick skinned and would welcome advise from experienced traders.

 

[meanreversion]

Have a look at 'Beyond Technical Analysis' by Tushar Chande. Good book, and it details modified trend strength indicators.. the opinion expressed is that ADX is a little inefficient.

 

[Boswell]

Thankyou meanrevesion, I will try to order that book.

 

[Pazienza]

How does ADX work? It doesn't, especially not for you.

The SB Handbook is a good introduction to everything, but don't bother trying to trade his systems. You've got a decent overview, and you are now ready to do further research.

 

[Boswell]

Pazienza,

Thanks for the info.

Can I take you through what I consider to be a good trade I made last year. Went long on New Britain Palm Oil NBPO at 553, it went up to over 800, then fell back triggering a stop at 780. That part I got right, the trend had developed and got in at a reasonble time, and got out with a profit. Where I failed is not getting back in when it then went back again, something in the SB handbook that does make sense about waiting a few days to see if it was just a short profit taking, then the trend continuing, or if was the start of a new trend.

Can you see what I am getting at, trying to find other indicators of what the trend MAY do. I'm not so stupid to think you can try and pick tops and bottoms, but am looking for indicators to refine trigger points to enter a trade, and where to place stops. Just trying to sweak a bit more, and limit any loses.

 

[Pazienza]

Pazienza,

Thanks for the info.

Can I take you through what I consider to be a good trade I made last year. Went long on New Britain Palm Oil NBPO at 553, it went up to over 800, then fell back triggering a stop at 780. That part I got right, the trend had developed and got in at a reasonble time, and got out with a profit. Where I failed is not getting back in when it then went back again, something in the SB handbook that does make sense about waiting a few days to see if it was just a short profit taking, then the trend continuing, or if was the start of a new trend.

Can you see what I am getting at, trying to find other indicators of what the trend MAY do. I'm not so stupid to think you can try and pick tops and bottoms, but am looking for indicators to refine trigger points to enter a trade, and where to place stops. Just trying to sweak a bit more, and limit any loses.

Try reading Pring on Price Patterns for more ideas. For what it's worth I wouldn't be trading real money yet if I were you.

 

[Boswell]

Try reading Pring on Price Patterns for more ideas. For what it's worth I wouldn't be trading real money yet if I were you.

Thanks, sensible advise, I understand that paper trading and trying to refine a trading programme that suits me is the way forward. Though if I am going to be honest I do find that difficult. All my trades thus far have been for the minimum amount, a pound a point, and have only traded 7 times last year totalling a small loss. I find that having only one or two trades actually live and either making me, or losing me money spurs me on to find out far more, concentrate than just solely paper trading. No doubt many will disaprove but one thing I have learnt is you have to find a way of fitting learning and trading to your own personality.

 

[Ambrose Ackroyd]

ADX is a waste of space.

Forget it.

 

[bedsit]

I tried it some time ago without too much success. IMO it's a seriously lagging indicator.
Still there could be some traders who use it - let's see if there is any positive response.