Parts 3 and 4 of the “on chart” lessons for reading the ADX. They go pretty quick and there’s some icky clicking, but I made them before I figured out how to really reduce the clicking. Anyway, it’s the PRINCIPLES of the ADX that matter here, and how to combine various patterns of strength and weakness. The ADX is one indicator that is great at showing strength and weakness.

This first video for today also has a little bit on the DMI/DI lines, in addition to showing the ADX principles on real charts. I don’t pay the directional movement indicator/index lines much attention because they really don’t deserve it, but there is a little bit. You could spend years studying those two lines and trying to figure out one significance after another. I don’t, however recommend that course of study.

This second video on the ADX is more of the same, but goes into some other aspects of ADX reading that aren’t covered in other videos. Again, these are from real time charts…

That’s about the extent of the information on the ADX that I’ll be giving out here on the blog. There will be more on the inside, coming in August.

The principles of the ADX and the conditions are given in previous posts.

So if you have any comments or questions, please leave them below. And while you’re at it, sign up for the email stuff above (and to the right). You give me your name and email address, and I’ll give you free silver membership into the “Inner Sanctum” when it opens up in August.

And let me know what kind of stuff you want to see in the Inner Sactum. I’ll do what I can to make it happen. Have a truly phenomenal trading day!

When you’re trading Forex, strength and weakness agreements have a tendency to come in handy. One of my favorite indicators for tracking strength and weakness patterns is the ADX. Today, we’ll cover ADX trends and their respective strengths and weaknesses, and an example of ADX weakness in time, on consecutive charts.

That’s some of what’s on today’s video on ADX Trends:

So the first thing you need to have a trend showing on the ADX is for there to be strength showing on a move. If the market moves lower and the ADX increases, that’s a stong move down, and the first step needed to have an ADX trend.

The second component needed is for the market to retrace some of the strong move, and have the ADX decrease, saying that there’s weakness in the counter-strength direction. So if the market moves lower and the ADX increases showing strength, then the market moves higher with the ADX decreasing, that’s the second part of having an ADX trend.

The third and final component is for the market to move farther in the direction of the prior strength.
Then there is an ADX trend on that chart, and that trend is either strong or weak.

In a strong trend, the ADX moves higher than it was at the end of the strong move in the same direction. In a weak trend, the ADX does not move higher than it was at the end of the strong move in the same direction.

Example: The market moves down, the ADX increases - shows strength in moving lower.
The market then moves higher, and the ADX decreases - shows weakness in moving higher.
The market then moves farther down than it was before the retracement up began.

That’s an ADX trend, and it is either strong (if the ADX is also higher than it was as the market moved farther), or weak (if the ADX does not move higher than it was as the market moved farther).

That’s it on the ADX trends. If you have any questions or comments, please leave them and I will get back to you as soon as I can. Have a tremendously successful trading day!

When you’re trading Forex markets, depending on your trading system, you might have to be able to track strength and weakness situations. The ADX, Average Directional Index, is a great indicator for tracking that strength and weakness on one chart.

Here is a video on ADX Moves in a forex market…

When the market you’re watching is moving higher, and the ADX is rising to the upward motion, that upward motion is strong. If the ADX is falling, then that upward motion is weak.

When the market you’re watching is moving lower, and the ADX is rising to the downward motion, that downward motion is strong. If the ADX is falling, then that downward motion is weak.

You’ll see on the next video how to use the ADX to track trend direction on a chart.

If you have any questions or comments, please leave them. I’ll answer or respond as quickly as I can.

Have a fantastic trading day!

Below is a video that shows a couple more ADX principles and shows how to look at them on a chart, including the theory behind the ADX. I’ll review a bit after the video…

So you see the difference between the strength and the weakness in trends? While the market moves farther in a direction, the ADX either moves higher than it was, or it doesn’t.

When the ADX moves higher as the market moves farther up or down, (after strength shown in that direction) then that’s strength.

When the ADX does not move higher as the market moves farther (after the ADX has already show strength in that direction), then that’s a weak move at the time.

XOW - ADX Outta Whack

Also shown on the video is the XOW, or “ADX Outta Whack“. The market moves with the ADX showing strength in a direction, then the market corrects a bit, then retraces part of the correction. As the market is retracing part of the correction, the ADX moves higher than it was before the correction (after a weak move registered in the opposite direction).

What the ADX is saying is completely out of what is visible in the market action and says basically that even though the market did not move farther in the direction of strength, the new motion in that direction is stronger than when the market was farther in that direction. For Forex Traders this XOW setup is a fantastic trading opportunity that doesn’t show itself very frequently.

It’s shown in the video so you can see it. AND, coming next week will be more ADX training videos, but with real charts instead of me hanging out at home with my white board.

So if you have any questions, please ask. Any comments? Leave ‘em. I’ll get to your question or comment pretty quickly. And if you want a LOT more useful info, I’ll have a secret area of this site available only to you if you leave your name and email address. Inside will be even more killer, more structured info and non-youtube videos, audios, and training ability. (There will definitely be a free section of the “Inner Sanctum” of DominationTrading.com - but that won’t be up until into August, 2008.

Let me know what you want more of so I can give it to you. Please, dear Forex Traders, let me know what you want to know and I’ll be more than happy to provide it if I can. Trade with greatness.

Here’s a video on the ADX principles and ideas, part 1:

There will be another ADX video covering some of what was not in this video. The next one will also cover weak trends, and the killer XOW and how to use it in your forex trading.

Don’t worry, there will also be a video or two (or more depending on your questions) of applying the ADX on real currency charts. You know the kind, the screen capture.

Quick review of the ADX video above: Covered strong moves (ADX increasing), weak moves (ADX decreasing) - there’s more to them, so watch the video above to get more. Trend basics were covered briefly, and I alluded to the “double-high” ADX, a special kind of strength that is AWESOME to trade with when you see it in the right place!

If you have any questions, or if I was unclear on anything, please let me know - and feel free to leave any comments you have, questions or whatever. I’ll definitely get to it as soon as I can.

And in August, I’ll be creating a special “members only” section of this site that will only be available to you if you enter your name and email in the form above and to the right. It’ll be free, with other options to be added later. So enter your name and email above so you can learn even more about how to trade your favorite forex currency pairs.

Take care and have a truly phenomenal trading day!

Things are crazy here, so I won’t be making a forex training video tonight. Instead, here’s some great, useful information for if you use the ADX (Average Directional Index).

ADX Basics: Definitions of move and trend, and the 4 Main ADX Principles

In the ADX we can see that we have varying degrees of strength and weakness. Those varying degrees are given below, and are important later on because when certain conditions are not met, we KNOW what has to happen. Every single time, but not always to a new extreme.

Definition of move on the ADX:

When the market makes a move and the ADX changes direction. (i.e. from moving up to now moving down, or from moving down to now moving up. A flat ADX is not a change in direction.)

1. When the market makes a move and the ADX increases, that move is a strong move on that chart at that time.

2. When the market makes a move and the ADX decreases, that move is a weak move on that chart at that time.

Definition of trend on the ADX:

After a strong move (as above, or trend of any kind) the market moves in the other direction and the ADX decreases, THEN the market moves farther in the direction of the previously strong move (or trend of any kind), we now have a trend on that chart at that time.

3. In a trend, when the ADX moves higher than it was at its previous high peak, we have a strong trend on that chart at that time.

4. In a trend, when the ADX is not now higher than it was at its previous high peak, we have a weak trend on that chart at that time.

The idea behind the definition of trend…

Is that we have strength in any form (a weak trend is still stronger than a weak move), then the ADX decreases, and after that decrease, the market then moves farther than it did before in the previous direction of strength. [Please note in the above that we have moves and trends. Also note that we have strong move, weak move, strong trend, weak trend.]

Definition: End of a Trend

A trend is over on that chart when the ADX tracks strength in the direction opposite the trend. Once the ADX says a trend is over on that chart, more strength on that chart in the same direction is now a move until the conditions are again met for it to be a trend on that chart at that time.

If the ADX does not fall between moves in the market, and still tracks strength in a direction then keeps moving in that direction, it is still a move.

The ADX must fall, even just a little bit, before again moving up as the market moves farther that it previously did in order to have a trend. Once the market moves farther, we have either a strong trend or a weak trend.

In sequence from weakest to strongest: weak move, strong move, weak trend, strong trend. In defining trend, anything other than a weak or very weak move counts as previous strength.

Only compare ADX peaks that are tracking the same direction of movement or trend strength.

ADX Principles Shown on a Chart

Let us take a look at the ADX (black line indicator below) regarding strong and weak moves:

It is possible to have a move be weak, then turn strong. It is possible to have a move be strong then turn weak. It is possible to have a weak trend turn to a strong trend. It is possible to have a strong trend turn to a weak trend, or even a weak move. See the coming video(s) on the ADX for more explanation.

If you have any questions or comments, please leave them. I’ll get back to answer them asap. Since part of my goal here is for you to understand what I’m teaching here, if there is anything you don’t “get”, just ask.

Have a truly phenomenal trading day (and weekend!) P)