Optimum ADX Forex Trading Strategy
There’s an old adage in the market, “History tends to repeat itself,” and millions of traders have continued to develop their trading system around this idea.
Technical analysis is built to look for similar patterns that have formed in the past, with the belief that price will act in the same way.
The Optimum ADX forex trading strategy is a technical analysis strategy that seeks to spot profitable market trends using a trusted technique.
Learn how to buy and sell pairs with this powerful strategy:
MetaTrader4 Indicators: Average Directional Movement Index (Parameters Modified; Period=28, Color Width Modified), i-AMMA.ex4 (Inputs Variable Modified; MA_Period=14), i-AMA-Optimum.ex4
Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day
Recommended Trading Sessions: Any
Currency Pairs: Any pair
Buy Trade Example
Long Entry Rules
Initiate a buy entry if the following indicator or chart pattern gets displayed:
- If the black dotted orange line of the i-AMA-Optimum custom indicator intersects the red i-AMMA custom indicator line in a bottom up fashion with price trading somewhat above, price is said to be taken higher i.e. a trigger to go long on the designated currency pair.
- If the yellow green +DI line is greater than the wheat –DI line of the ADX MT4 indicator as seen on Fig. 1.0, price is said to be pushed somewhat higher i.e. a signal to go long on the selected currency pair.
Stop Loss for Buy Entry: Place stop loss 5 pips below short-term support.
Exit Strategy/Take Profit for Buy Entry
Exit or take profit if the following rules or conditions takes precedence:
- If price closes below the black dotted orange line of the i-AMA-Optimum custom indicator during a bullish trend, it is an indication of weaning bulls power i.e. a trigger to exit or take profit at once.
- If the wheat –DI line crosses the yellow green +DI line of ADX indicator to stay above as shown on Fig. 1.0, an exit or take profit is recommended.
Sell Entry Rules
Enter a sell order if the following holds true:
- If the black dotted orange line of the i-AMA-Optimum custom indicator intersects the red i-AMMA custom indicator line in a top downward manner with price trading slightly below, price is said to be pushed lower i.e. a trigger to go short on the specified forex pair.
- If the wheat –DI line is greater than the yellow green +DI line of the ADX MT4 indicator as depicted on Fig. 1.1, price is said to be pushed fairly lower i.e. a sell market alert.
Stop Loss for Sell Entry: Place stop loss 5 pips above short-term resistance.
Exit Strategy/Take Profit for Sell Entry
Exit or take profit if the following takes center stage:
- If price closes above the black dotted orange line of the i-AMA-Optimum custom indicator during a sell signal, it is an indication of halting bears power i.e. a trigger to exit or take profit forthwith.
- If the wheat –DI line gets aligned below the yellow green +DI line of ADX indicator while a sell signal is ongoing, an exit or take profit will suffice.
Sell Trade Example
Developed by Welles Wilder, the average directional index (ADX) is a technical indicator deployed in determining the strength of a trend.
It is typically deployed in a chart window along with two lines identified as the DMI (Directional Movement Indicators).
The i-AMA-Optimum is an optimized version of the Kaufman’s Adaptive Moving Average (AMA) that was originally developed by Perry Kaufman and finds use on short and long periods.
The i-AMMA is a 25-day Average Modified Moving Average that is deployed as a filter.