When the Swing Index crosses over zero, then a trader might expect short-term price movement upward. When the Swing Index crosses below zero, then a trader might expect short-term price movement downward. Accumulative swing index forex trading can be noted from the chart above of the e-mini futures contract, numerous potential buy and sell signals are given.
The Swing Index advertises itself as a tool for very short-term trading. The information above is for informational and entertainment purposes only and does not constitute trading advice or a solicitation to buy or sell any stock, option, future, commodity, or forex product. Past performance is not necessarily an indication of future performance. It was designed to be used for futures trading, but can be used for stock trading and currency trading too. Accumulative Swing Index as a Confirmation Tool In the chart shown below, the Accumulative Swing Index confirmed Gold’s downtrend. Subsequently, when Gold broke the downward trendline, the Accumulative Swing Index confirmed the trendline break as well.
Similarly, the upward move in the Gold futures contract was confirmed by the Accumulative Swing Index and the upward trendline break was confirmed too. Potential Buy Signal – Accumulative Swing Index A trader might consider a buy signal when the Accumulative Swing Index breaks above a downward trendline or, in a price consolidation period, above resistance. Potential Sell Signal – Accumulative Swing Index Contrastly, a trader might consider a sell signal when the Accumulative Swing Index breaks below an upward trendline or, in a price consolidation period, below support. The information above is for informational and entertainment purposes only and does not constitute trading advice or a solicitation to buy or sell any stock, option, future, commodity, or forex product. Past performance is not necessarily an indication of future performance. ADX staying below 20 level — there is no trend or the trend is weak.
ADX moving above 20 level — trend is strong. ADX passing 40 level — trend is extreme. ADX value rising — trend is going stronger, falling — trend is weakening. DI stays on top of -DI — uptrend is in place.
DI — downtrend is in place. Two DI cross — trend is changing. ADX advices on the strength of the dominant forces that move market prices here and now. In other words, ADX advices on trend tendencies: whether the trend is going to continue and strengthen or it is about to lose its positions. The author of Average Directional Index J.
ADX are not an easy to take a grasp of from the first look, many Forex traders avoid using ADX in favor of more visually comprehensive indicators. Traders then need to draw a horizontal line at the level of 20. All readings of ADX which are below 20 suggest a weak and unclear trend, while readings above 20 indicate that a trend has picked up. That is, basically, the simplest explanation of the purpose of ADX. ADX allows Forex traders to determine whether the trend is strong or weak and thus choose and appropriate strategy to trade with: a trend following strategy or a strategy fit to consolidation market periods with no significant price changes. There is also additional line to be added to ADX indicator window – at 40 level.
If ADX is traded below 20 – there is no trend or the trend is weak, thus a non-trend-following strategies should be used, otherwise losses may occur as a result of false signals and whip-saws taking place. An example of non-trend-following method is channel trading. If ADX is traded above 20 but below 40, it is time to apply trend following methods. An example would be: Forex trading Moving averages or or trading with Parabolic SAR indicator. Stop loss order to a break even. When ADX passes 40 level, it is a good time to begin collecting profits gradually scaling out of the trades on rallies and sell-offs and protecting remaining positions with trailing stops. DI lines are used for spotting entry signals.