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The ADX indicator (Average Directional Index) is amongst the most widely used indicators in Forex trading. The reason for its use is because it provides us with 2 factors:
1. It tells us if the market is trending
2. It shows us how strong that trend is
It’s purpose is to allow us to get into trends just after they are formed and get out before the market reverses back.
The period setting for the ADX indicator is 14 (this is a default setting) and you should be using this setting if you are trading any time frame at or above H1. If you are trading time frames that are lower than H1, then you should use a period setting such as 10.
We are looking for 2 factors when trading the ADX indicator:
1. A cross over the 25 line to indicate a trend is likely to happen
2. ADX indicator needs to rise to show us that trend strength is increasing.
It is only at this point that we should take the trade. One thing to bear in mind is that the ADX indicator is a lagging indicator so it can take time to adjust to prices. This is why you may find that a few trades are misses.
Oscillators are among the most popular technical indicators used by traders. Here to talk about them is trading expert David Jones and he walks us through the way they function and how they should be used.
As with all indicators there are many traps and tricks that need to be known to utilise them to their full potential. Experience is invaluable but we think this video will save you some headaches along the way. Real examples and an easy way of explaining them is what you’ll find but if you do have questions let us know in the comments section.
At Trading 212 we provide an execution only service. This video should not be construed as investment advice. Investments can fall and rise. Capital at risk. CFDs are higher risk because of leverage.