Scalping ideas (ADX and Bollinger bands)
Submitted by Edward Revy on April 22, 2007 - 10:24.
Scalping with the help of ADX:
To scalp effectively with minimum time spent, Forex scalpers need to know when the market is trending well and when there is nothing to wait for.
To find out about the strength of the market trend use ADX (Average Directional Index) indicator.
ADX does not show the direction of a current trend, it only shows the strength of the trend. Reading below 20 indicates a weak trend, reading just above 20 – gaining new strength trend and reading above 40 – very strong trend.
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It could be 5 min or 1 min for scalping.
Regards,
Edward
thanks ...i will try it but what is the timeframe...5 minute?
Although ADX hovering above 40 suggests a strong trend, it is probably better to avoid opening new trades in the direction of a current trend. Otherwise, quite often a situation like yours can be seen: you get into a trade and soon after ADX starts to descend...
Try to balance your system in such way that you can initiate a trade when ADX is above 20 but below 35-40.
Use ADX as a helping tool, a confirmation indicator that would add confidence when entering a trade. However, if your primary indicator or method provides a strong signal and ADX contradicts it, ignore ADX. Make your trading position smaller and initiate a trade.
Regards,
Edward.
I don't understand why ADX is considered so useful. I always have problems with it. Often when it's above 40 and you get into a trade, the trend starts going down and with the trend, ADX too goes down and you end up losing pips instead of making any. Any suggestions to how you tackle this issue?
Yes, default ADX(14) also ADX(20).
what setting of ADX do you proposed? is it the default?
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