ADX (Directional Movement Index) is an index tool available in almost all trading software such as MT4, MT5, Amibroker, ... or websites that specialize in charting things. available. Even the name of this indicator has somehow shown its function. So today I will show you how to use this indicator, as well as pros and cons of this indicator.

Usage and function of ADX

ADX system
ADX is made up of 3 lines (ADX, + DI and -DI) with a cycle of 14: As in the picture, we see three lines of different colors
- ADX: Blue line.
- + DI: Red line.
- -DI: Green line.
These lines each have a unique function that helps us determine the buying and selling points and measuring the strength of the market at the time of trading.

Usually we use 2 + DI and -DI lines to determine when to buy and sell. Time, not buy / sell points. The ADX line is used to determine the trend. In fact, this index does not manually add sugar at 25, while using it, we should add a horizontal line of 25 and 50. These two levels combined with the ADX index will help us determine when to strengthen, when decline.



Trading method

So what is the method of trading on this index? Let's start:
- Reversal: When the red line (-DI) and the green line (+ DI) are cut, the time of reversal is possible.
- Reversing zone: When the red line (-DI) is below the green line (+ DI) is entering the BUY (BUY) zone and vice versa.
- Determine the entry point: When the positive color line (ADX) from below the 25 line crossed above the 25th line, it is confirmed that the market has reversed. Here we will enter the trading order.
- Exit: Exit when the blue line (ADX) goes down (turn the head).
Trading on the ADX


Advantages and disadvantages of this index

Any method has pros/cons all. Nothing in this financial market is completely correct and nothing wrong. Remember, this is an index and all indicators of what happens after the price line. Basically, the price line goes after politics, news, etc. So to succeed on this battlefield you need to consider a lot of parameters, indicators and more information.

- Advantages:
+ Suitable for transactions with large time frames from H1 or above. The smaller the time frame, the greater the signal noise level.
+ It is applicable for trading almost all currency pairs, foreign currencies as well as securities.
+ Applying trading is quite good when the market tends to follow the trend. And the accuracy is quite high when the signal is in the trend along with the main trend.
+ ..... Investor verifies more ...!

- Defect:
+ Very few signals for trading this form.
+ There will be time periods with no entry points.
+ Need to have a clear trend to get the right entry point.
+ The method is not used for catching the bottom, catching the peak.
+ .... in the process of applying investors to self-verify more ....!

ADX index not only has the above trading method. But it can also be used to determine the strength of the market, divergence, identify the bottom, the top of the market, .... and many other methods.

Here I only guide the main of this index so that investors can bring the best profit possible. In addition, investors can read other methods, and learn more about this index.