Developing a system #21 (ADX at 25, 50 & 75)
Submitted by User on January 19, 2010 - 12:06.
Strategy by dean Miskovich
Maybe you have noticed this but I felt I might alert you to a phenomenon I noticed using the ADX indicator.
If you set up an ADX indicator window with the following parameters you will see the event happen:
ADX 14, 9
ADX 7, 4
(ADX 3, 2) optional
Horizontal lines at the 25, 50 and 75 values.
Now here's what I saw.
I noticed that the 25, 50, and 75 points seem to be inflection points, ie points where the market either pauses or turns. in addition, Market trends that strengthen through the 25 value tend to continue strengthening. Duh, right? But, the same trend that strengthens through the 50 mark will generally accelerate in the current direction after pausing at the 50 point.
The same trend, after acceleration through the 75 point, will most likely strongly reverse just above the 75 point.
These events happen very often on the daily and hourly time scales but tend to break down on much shorter time scales.
I am trying to develope a strategy based on this but need more testing to develope more accurate entry points. For now this seems to be a good indicator for determining exit strategies and more profitable exit points.
Hope this helps.