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ADX breakout scanning

  • By Ken Calhoun,
  • Active Trader Magazine
  • Technical Indicators
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Spotting volatility breakouts that are likely to continue can be daunting. The Average Directional Movement Index (ADX) — an indicator that measures trend strength — can help. The ADX is unique because it can work as a “leading indicator” that reveals the strength of a market’s trend before a breakout move occurs. The main ADX line is typically displayed along with two other lines — the Directional Movement Indicators (+DMI and -DMI) — and the three can be used together to help reveal strong trends. The main ADX line ranges from zero to 100 and usually fluctuates between 10 and 50. Readings below 20 reflect trendless conditions — consolidations that should be avoided. Read on to learn more.

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Article copyright 2011 by Active Trader Magazine. Reprinted from the April 2010 issue with permission from Active Trader Magazine.

The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data. 

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