The ADX Trend MT4 Indicator represents an average directional index price channel. This channel shows the overbought/oversold levels of the price that helps you to determine the trend and the key trade-entry levels.
ADX tools are mainly used to observe the strength and weaknesses of the market trends. It helps us to determine the overbought and oversold positions of the market during a trend-following movement of the price.
ADX Trend MT4 Indicator Overview
Instead of using a single average directional index line, this indicator applies a dynamic ADX channel at the main chart window. Both levels are plotted with different parameters. The higher and lower ADX levels represent the overbought and oversold levels of the price respectively.
The ADX Trend MT4 indicator offers a great simplicity in trend-based tradings for beginners. It works best when applied between M1 and H1 charts. Therefore, works best as a scalping and intraday trading tool.
ADX Trend MT4 Indicator Explained
This indicator uses a standard deviation of 1.8 with a 5-day range count period. As a result, it is more sensitive to the recent price movements than the past performance of price movements. For this reason, it is ideal to use the ADX Trend for short-term and intraday trend analysis purposes.
The lower ADX level works as dynamic support and the oversold area of the price. On the other hand, the higher ADX level represents the dynamic resistance and the overbought zone. We’ll choose the trade direction (buy or sell) depending on whether the price is getting closer to a higher or lower ADX level.
For identifying the trade opportunities, we’ll have to depend on reversal candlestick patterns. For example, a bullish pin bar at the lower channel or a bearish pin bar at the higher channel are good options for going long and short respectively.
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ADX Trend MT4 Indicator: Buy Conditions
- The price hits the lower ADX trend support
- The candlesticks plot reversal patterns at the oversold area
- SL below the ADX support
- Take profit when the price makes a bearish reversal move at the overbought zone
ADX Trend MT4 Indicator: Sell Conditions
- The price rejects to break above the ADX trend resistance
- A bearish reversal pattern is plotted at the overbought zone
- SL above the ADX resistance
- Take profit whenever the price rejects the oversold area and treats the level as support