FREE FOREX STRATEGIES

Scalping ideas (ADX and Bollinger bands)


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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ADX will mislead you if you try using it for all three time frames.

Instead, apply ADX only for the time frame that is used to identify the main trend. For example, if you use 15 minute charts to identify the main trend, add ADX there to also learn about the strength of the trend. Then move down to lower time frames to identify entries, but already without a help of ADX indicator.

Thomas

ADX indicator readings vary with timeframe, it can be below 5 on a 1 min chart, 20 on a 5 min chart and over 40 on a 15 min chart. I usually use all 3 timeframes to enter traders and adx doesnt seem to fit into place. Any ideas?

Hi Henrique,

That's exactly what you need - Bollinger Band with (20, 2) settings.

Regards,
Edward

Hi Edward


Many thanks for all your strategies. Hopefully sometime I will be able to get some money with Fx.
For now I'm just reading and testing as much as I can, and honestly I'm learning a lot with your help.
I found this Bollinger Bands very helpful, but what the best setting for 5m charts? I'm using 20,2 which is the default in my software.

Cheers from Portugal

Henrique

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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