Learn Forex Trading: ADX filter trading

ADX filter trading is a trend following strategy based on the moving averages and ADX.

Time Frame 30min or higher

Currency pairs:any.

Setup indicators:

Three moving averages:

1. 5 exponential Moving average, close

2. 10 exponential Moving average, open

3. 80 simple moving average set to close, 80 SMA only serves as trend direction and dynamic

resistance and support points.

In sub window chart

4. Parabolic Sar set to (0,2 – 0.02) will serve as your trade direction alert.

5. ADX (14 period)

+D1 it's your buy entry signal and confirmation to enter the market

-D1 (is the sell entry confirmation.

ADX above 40 shows that the trend is strong (trending market) and profitable. ADX can also serve to indicate a divergence.

6. 4 horizontal trendlines with parameters set to 10, 20, 25 and 40 (these are optional).

Buy

1. Parabolic Sar will first indicate an uptrend with the dot below the price.

2. ADX above 20 level,

3. +D1 above 20 level,

4. -D1 below 10,

when the previous four conditions have been successfully been met, you can open an buy order.

Sell

1. Parabolic Sar will first indicate an downtrend with the dot above the price.

2. ADX above 20 level,

3. +D1 below 10 level,

4. -D1 above 20 level.

when the previous four conditions have been successfully been met, you can open an buy order.

Exit position.

They are four options:

first:

1. fixed stoploss on the previous swing, trailing stop loss and breakeven stop ( after n..pips in gain move stop loss at the entry position).

Second:

When the previous three conditions have been me

Third

EXIT PLAN THREE

1. ADX is falling below 20 level,

2. +D1 or D- go below 20 lewvel,

3. Parabolic Sar had reversed

when the previous three conditions have been met, exit to the market.

Fourth1. -D1 has cut across +D1 (below 20) and is rising up after cutting across to 20 while the +D1 is still falling (or opposite),

2.Parabolic Sar had reversed.

.

When not to trade with this strategy, conditions:

When +D is rising above 20 level and -D1 is moving below 10 level but ADX is falling to below 25 level. Don’t trade. You can trade if ADX is rising from 15 to above 20 but not when it's trending down to below 25 level. See picuture.

when both ADX and D+ are rising to above 20 level and –D is moving to below 10 level but suddenly, one of either ADX or +D starts to trend down before the final confirmation is confirmed, don’t open trade.

Trend continuation trading

Trend continuation first condition

1. D+ is retracing to below 20 level

2. ADX is not retracing and the

3. Parabolic Sar had not indicated a trend reversal. Stay in this trade but watch out with a stoploss.

Trend continuation second condition

Against all exist signals and confirmation, hold on to open order once –D1 is below 10 no matter what is happening at the other indicators.

Trend continuation third condition

Against all exist signals and confirmation, hold on to open order once ADX is rising above 40 and showing no sign of retracing, don’t worry about what other indicators are doing, it’s only background noise. Hold on to position but with stoploss order.