Buy sell indicator
Why Take Advantage Of A Forex Buy Sell Indicator
Forex traders need technical analysis to succeed in buying and selling of currencies. Indicators are tools which can help forex trading in this endeavor. Some samples of indicators include Moving Average Convergence Divergence, Parabolic SAR, Relative Strength Index, and Stochastics. There are also buy and sell forex indicators like the Directional Movement Index which is used to find out the asset’s price direction.
Developed by J. Welles Wilder in 1978, the average directional movement index is an indicator of the strength of a trend based on the financial instrument’s series of prices. It has become a popular tool for technical analysis and a standard indicator provided by different trading platforms.
How The Average Directional Movement Index Is Computed
The average directional movement index is actually a combination of 2 indicators created by Wilder: the negative directional indicator and the positive directional indicator. Both indicators require the closing, high, and low price data every period.
The UpMove is equivalent to the current high price less the previous high price while the DownMove is equivalent to the previous low price less the current low price.
If the UpMove is greater than the DownMove and UpMove is greater than zero, the positive directional movement is equal to the UpMove. Otherwise, it is equal to zero.
On the other hand, if the DownMove is greater than the UpMove and the DownMove is greater than zero, the negative directional movement is equal to the DownMove. Otherwise, it is equal to zero.
The positive directional index is 100 times exponential moving average of the positive directional movement divided by the average true range. The negative directional index is 100 times exponential moving average of the negative directional movement divided by the average true range. The exponential moving average is computed over the selected periods while the average true range is the exponential average of the true ranges.
The average directional movement index is 100 times the exponential moving average of the absolute value of the positive directional index less the negative directional index. It doesn’t, however, indicate to which way the trend is headed. It only computes the trend strength. Before the strength can be computed, a trend must exist first. An average directional movement index of at most 20 indicates weak trend while an average directional index of at least 40 indicates strong trend. A very strong trend has at least an average directional movement index of 50.
We recommend using this free forex indicator as it have calculated method of buying and selling currencies