What is Average Directional Movement? Currency Trading Indicators

What is Average Directional Movement?
       Average Directional Movement Index is one of the technical Indicator which helps to decide if nearby a price trend. The easiest trading technique based on the method of directional faction implies evaluation of two direction indicators.

•     14-period+DI
•     14-period -DI.

       -DI is subtracted to +DI. ATX Indicator provides buy signal when +DI is more than -DI, and selling when +DI lower than -DI. After the buy signal one must wait till the price has exceeded the point of extremum (“rule of points of extremum”), and only then buy. The price fall down to exceed the level of the point of extremum, one must keep the short position.

Calculation:

           ADX = SUM[(+DI-(-DI))/(+DI+(-DI)), N]/N

N - Number of periods used in the calculation.