Introduction to the ADX Trend Indicator
Table of Contents
Price action often oscillates up and down as market participants react to overbought and oversold price levels. Smart traders would want to capture such reversals by identifying these extreme price levels which are prone to mean reversals.
The ADX Trend Indicator is an indicator which can be used for the purpose of identifying such extreme price levels and help traders find potential mean reversal trades.
What is the ADX Trend Indicator?
The ADX Trend Indicator is a channel type of indicator just like the Bollinger Bands and Keltner Channel. This indicator plots a smoothened channel like structure which envelopes most of price action. Its upper line is color green, while its lower line is color red.
The green line represents the overbought marker. Price action breaching above the green line can indicate an overbought market.
On the other hand, the red line below price action represents the oversold marker. Price action dropping below the red line can be considered an oversold market.
How the ADX Trend Indicator Works?
This indicator uses price action movements and swings within a range period and uses a unique algorithm and formula to arrive at the channel that it plots.
It also uses standard deviations to measure the distance of price action and the outer lines, and a smoothening factor to smoothen out the movements of the ADX Trend channel.
This creates a channel which is very smooth and tends to envelope most of price action majority of the time.
How to use the ADX Trend Indicator for MT4
The ADX Trend Indicator has several variables within its Settings tab which traders can use to tweak the ADX Trend channel.
Traders can modify the “Swing Count”, “Range Period”, “Price”, “Speed”, “Deviation”, “Smooth Length”, and “Smooth Phase” in order to adjust the sensitivity, smoothness, and width of the ADX Trend Indicator.
Since the ADX Trend Indicator is a smoothened out channel indicator which usually envelopes most of price action, its strength lies in identifying overbought and oversold price levels which are prone to mean reversals.
The best way to use this indicator is as a filter for identifying possible mean reversal trade setups coming from extreme price levels. Once an overbought or oversold market condition is identified, traders can wait for potential reversal signals based on reversal candlestick patterns and trade mean reversal setups coming from such extended price levels.
Buy Trade Setup
When to Enter?
Identify an oversold market with price temporarily dropping below the red line. Open a buy order if price action immediately develops a bullish reversal candlestick pattern. Set the stop loss below the pattern.
When to Exit?
Close the trade as soon as price action shows signs of a probable bearish reversal.
Sell Trade Setup
When to Enter?
Identify an overbought market with price temporarily breaching above the green line. Open a sell order if price action immediately develops a bearish reversal candlestick pattern. Set the stop loss above the pattern.
When to Exit?
Close the trade as soon as price action shows signs of a probable bullish reversal.
This indicator tends to be a very reliable technical indicator when used as a basis for identifying oversold and overbought markets. The trade setups it produces also tend to be high probability trade setups especially when used with a strong reversal pattern.
MT4 Indicators – Download Instructions
ADX Trend Indicator for MT4 is a Metatrader 4 (MT4) indicator and the essence of this technical indicator is to transform the accumulated history data.
ADX Trend Indicator for MT4 provides for an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.
Based on this information, traders can assume further price movement and adjust their strategy accordingly. Click here for MT4 Strategies
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How to install ADX Trend Indicator for MT4.mq4?
- Download ADX Trend Indicator for MT4.mq4
- Copy ADX Trend Indicator for MT4.mq4 to your Metatrader Directory / experts / indicators /
- Start or restart your Metatrader 4 Client
- Select Chart and Timeframe where you want to test your MT4 indicators
- Search “Custom Indicators” in your Navigator mostly left in your Metatrader 4 Client
- Right click on ADX Trend Indicator for MT4.mq4
- Attach to a chart
- Modify settings or press ok
- Indicator ADX Trend Indicator for MT4.mq4 is available on your Chart
How to remove ADX Trend Indicator for MT4.mq4 from your Metatrader Chart?
- Select the Chart where is the Indicator running in your Metatrader 4 Client
- Right click into the Chart
- “Indicators list”
- Select the Indicator and delete
ADX Trend Indicator for MT4 (Free Download)
Click here below to download: