ADX Trend Tool : What is it, And How Does it work?

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Average directional movement index, (also ADX) is a trend tool used to show the strength of the trend (upwards/downwards) and to find trend reversal points.

But those aren’t the only uses of ADX, you can also use it to determine price volatility and to identify the best assets to trade on at a given time.

What makes the ADX indicator?

ADX consists of three lines.

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  1. +DI – used to identify entry points.
  2.  -DI also used to identify entry points.
  3.  And the mainline (ADX line) which shows the strength of a trend.

 

How to Activate the ADX Trend Tool in IQ Option.

Login to IQ option if you already have a trading account.

If you don’t have one, create it here. You will get $1,000 virtual cash for practice.

  1. Now, locate and click on the indicator tool.
  2. Move your cursor to trend then click on the Average directional movement index to activate ADX.

Also Read: – How To Open an IQ Option Demo Account For Beginners.

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It is recommended that you keep the indicator’s standard settings to period 14. You can change the colors of +DI, -DI and the ADX line if you want to.

Done that?

Your chart should look like this.

ADX Indicator

How to Read Trading Signals on IQ Option’s ADX Indicator.

When you see the ADX line rising; know there’s an upward trend getting stronger. You’ll also notice that the +DI line rises higher above the -DI line to confirm the ascending trend.

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On the flip-side, when the ADX line falls, take that as a signal to a stronger downtrend. Check that the -DM line is higher than the +DM line to confirm the descending trend.

ADX trend tool (Indicator)

Recap

Open a Down Trade if: –

  1. -DI and +DI intersect – such that -DI is higher than +DI.
  2. The second condition should be that the ADX line is moving upward as in the image above.

Open an Up Trade if: –

  1. -DI and +DI intersect – such that -DI is lower than +DI.
  2. The second condition should be that the ADX line is moving upward as shown in the image below.
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