Trading Signals Generated by the ADX Crossover MT4 Indicator
The ADX Crossover MT4 indicator is an overlay indicator that is applied on the price chart. Working on the same principles as the ADX or the Average Directional index indicator, the ADX Crossover indicator, as the name suggests plots buy and sell arrows when there is there is a crossover of the DI+ and DI-.
The ADX Crossover MT4 indicator helps traders to remove any complexity from using the traditional ADX indicator. As readers may know, the traditional ADX indicator from the MT4 platform merely plots the DI+ and DI- values including the ADX line. However, with the ADX crossover indicator, traders are alerted to whenever there is a crossover of the DI+ and DI- values.
The first chart below shows the traditional ADX indicator applied to the chart alongside the ADX crossover indicator. As you can see, the indicator plots the buy/sell arrows whenever there is a change of trend.
What is the ADX Indicator?
The Average Directional Index is a trend strength indicator. It comprises of three variables, namely the DI+, DI- and the ADX. The ADX indicator was designed by Welles Wilder and is used to define the trend. The DI+ and DI- form the main aspects of the indicator. According to Wilder, the directional movement is derived by calculating the difference between these two values (DI+ and DI-). The DI+ shows a positive directional movement when the current high is subtracted from the previous high and the value is greater than the previous low subtracted from the current low. Based on this value, the ADX or Directional movement then equals the current high subtracted from the previous high and is positive.
With the ADX indicator, the main aspect to bear in mind is that while there may be numerous DI+ and DI- crossovers, the ADX indicator’s strength indicates the trend strength. A value of ADX above 28 (or 20 – 25 level) is generally used as a confirmation of trend strength and shows higher probability for the trend to prevail.
Trading with the ADX Crossover MT4 Indicator
The ADX Crossover indicator has only one setting which is to select the look back period, which is defaulted to 14. Once applied on the chart, the ADX crossover indicator plots the buy/sell arrows. But there is a drawback with the indicator as there is no filter of the trend strength. The chart below shows the price levels where the original ADX indicator shows the DM value of below 20, indicating a weak crossover, but still, the ADX crossover indicator plots the buy/sell arrows.
Therefore, traders need to apply caution especially if they want to replace the ADX Crossover indicator with the traditional ADX indicator. Besides this drawback, the ADX crossover indicator can be applied to other trend following indicators such as the moving averages or Bollinger band indicator to ascertain the trends and trade accordingly.
Drawbacks of using the ADX Crossover MT4 Indicator
While the ADX crossover indicator does a fine job by showing on price the subtle changes in trend, it does not completely encompass the ADX indicator in its entirety. For example, if you use the ADX crossover indicator as a replacement for the traditional ADX indicator, you will not be able to see the real trend strength. As the indicator’s settings suggest, the only value that can be changed is the ADX period. The indicator could offer better results, if there was an additional setting to filter only the strong crossovers where the ADX or DM value was above 28 (or 20 – 25) or a user preferred setting.
Recommended Time Frames for ADX Crossover MT4 Indicator
Technically speaking, you can use this MT4 indicator for all time frames. However, the shorter the time frame, you will see more fluctuation and possibly more whipsaw which may cause small losses that can eat up your portfolio quickly. We recommend that you use higher time frames like the 4H for better consistency.
ADX Crossover MT4 Indicator Download
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