ADX as a filter: how do you use trend strength?
ADX measures trend strength regardless of direction, and the classic use is a filter: only trade trend-following setups above a threshold, only fade below it. The threshold choice is the strategy.
What's your ADX setup?
- the period and threshold you use
- how it filters your entries
- the choppy market that slipped through the filter
The moving averages guide pairs naturally with ADX thinking.
Background: Moving averages explained: SMA and EMA
Moving averages smooth out price noise to show the trend. How simple and exponential averages are calculated, which periods traders use and where they fail.
What is the difference between SMA and EMA?
An SMA weights every period equally. An EMA gives more weight to recent prices, so it responds faster to new moves but can give more false signals.
What is a golden cross?
When a shorter moving average, typically the 50-period, crosses above a longer one, typically the 200-period. Many traders read it as a sign of a strengthening uptrend.
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