ADX and Money Flow Index Indicator

ADX and Money Flow Index Indicator

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In this video tutorial, we combine the ADX and Money Flow Index Indicator.

A quick recap on the Money Flow Index Indicator, the buy level is at 55 and the sell level is at 45.

Remember, for these levels to be valid, the MFI needs to hit the 80 level and the 20 level respectively.

Only then, we consider it a full cycle which will validate the buy and sell level.

So the MFI will be the first filter to this strategy.

Let’s assume we have a MFI buy signal which means the line has crossed the 55 level.

Next we will look to the ADX.

We want to see the ADX black line move above the 30 level.

Ideally, if both indicators can trigger the buy signal together – that’s best.

But it’s not going to be that way…

So some allowance might be needed for this strategy.

When the MFI has triggered the buy signal and the ADX has not, you can provide a few price bar allowance.

However, not too long… perhaps 3 or 4 bar allowance at most.

Similarly, when in a short position, we look for the MFI to cross the 45 level.

And then we will look for the ADX black line to be above the 30 level.

And the allowance given on both indicator to meet this criteria is within 3 price bar.

We just do not want to be in position when the MFI has crossed the trigger point for too long.

If it’s too long, it might not have the strength to carry the trade even if the ADX black line is above the 30 level.

That’s the general principles in all trading strategy.

You want to get into position at the pivot point or at the start of a trend.

Not get in at the tail end of a trend.

And with MFI, the start of the trend is the level 55 (for long positions) and level 45 (for short positions).

Overall a good strategy… but it’s not 100% mechanical.

Practice well as we always suggest.

See you on the next video…




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