The ADX (Average Directional Index) ranges from 0 to 100 and it doesn’t tell you if you’re in a bullish or bearish trend, it just tells you that you’re either in a trend if the ADX slope is above 20 and is moving up or if you are in a ranging market if the ADX is below 20 and the ADX slope is pointing down or it’s flat.

The ADX and Ichimoku Strategy - Indicator Settings

We’re going to use the ADX and the Ichimoku Cloud indicator in conjunction with key support and resistance level. The combination if these two indicators will tell us if it’s worth to take the breakout of that support and resistance level. This is a great way to reduce the amount of false breakouts that the market is prone to do. We’re going to use the standard default settings on both of these indicators: Ichimoku Cloud:

1. Conversion line = 9;
2. Base Line = 26;
3. Leading Span A = 26;
4. Leading Span B = 52;
5. Lagging Span = 26;

ADX setting: 14 periods;

The ADX and Ichimoku Strategy - Buy Signal Example

For a buy trading signal we’re going to look at key resistance levels, wait for the breakout to happen and if both the ADX and Ichimoku Cloud agree on the strength of this breakout you place a buy at the open of the preceding candle after the breakout candle. The ADX indicator must be above 20 at the moment the breakout happens and the price must have closed above the cloud if these two conditions are satisfied we can enter a long position with a stop below the Cloud. We’re going to ride this trend as much as possible and exit the trade only after we have two consecutive candle close below the conversion line.

ADX and Ichimoku Strategy - Buy Signal Example

The ADX and Ichimoku Strategy - Sell Signal Example

For a sell trading signal we’re going to look at key support levels, wait for the breakout to happen and if both the ADX and Ichimoku Cloud agree on the strength of this breakout you place a sell at the open of the preceding candle after the breakout candle. The ADX indicator must be above 20 at the moment the breakout happens and the price must have closed below the cloud if these two conditions are satisfied we can enter a short position with a stop above the Cloud. We’re going to ride this trend as much as possible and exit the trade only after we have two consecutive candle close above the conversion line.

ADX and Ichimoku Strategy - Sell Signal Example

The ADX and Ichimoku Strategy - BIG Plus Point

The biggest advantages that this strategy it gives you is the fact that as soon as your order will be triggered you almost immediately must be in profit. This can help you better judge those situations when you enter a trade, but the market moves against you as you can always close your trade before the market to hit your SL, which is a great way to minimize your risk and any losses.