ADX line represents the average trend index. It measures the trend strength of the market by calculating the fluctuation range of stock prices over a period of time. When the value of ADX line is high, it shows that the market is in a trend and investors can actively participate in the transaction; When the value of ADX line is low, it shows that the market is in consolidation or shock, and investors can adopt a wait-and-see strategy.
+DI line and -DI line represent positive and negative dynamic lines respectively. The value of the +DI line indicates the power of stock price rising, while the value of the -DI line indicates the power of stock price falling. When the +DI line is above the -DI line, it shows that the market bulls are strong and investors can consider buying. When the -DI line is above the +DI line, it shows that the market bears are strong and investors can consider selling.
When using ADX indicators, we generally pay attention to the following aspects:
We can judge the trend strength of the market by the value of the ADX line. It is generally believed that when the value of ADX line exceeds 25, the market is in a trend market; When the value of ADX line exceeds 50, the market is in a very strong trend. Investors can judge the risks and opportunities of the market according to the value of ADX line.
We can judge the trend direction of the market by the intersection of the +DI line and the -DI line. When the +DI line crosses the -DI line from below, it indicates that the market may change from a short position to a long position, and investors may consider buying; When the -DI line crosses the +DI line from top to bottom, it indicates that the market may turn from bulls to bears, and investors may consider selling.
We can also judge the inflection point of the market by the trend of ADX line. When the value of ADX line rises continuously and exceeds the previous high point, it shows that the trend intensity of the market is increasing, and investors can continue to hold or add positions; When the value of ADX line falls continuously and is lower than the previous low point, it shows that the trend intensity of the market is weakening, and investors can consider lightening their positions or waiting and seeing.
It should be noted that the ADX indicator is a trend indicator, which is applicable to the market with obvious upward or downward trend. When the market is consolidating or fluctuating, the signal of ADX indicator is prone to errors, and investors need to make a comprehensive analysis with other technical indicators.
ADX indicator is an effective technical analysis tool, which can help investors to judge the trend intensity and direction of the market. As an auxiliary tool, ADX index can't fully predict the market trend, and investors should make comprehensive judgments based on other technical indicators and fundamental analysis. At the same time, when using ADX indicators, investors should pay attention to timely verifying the indicator signals, reasonably control risks, and do not blindly follow the indicator signals for trading. Only by mastering the correct skills can we make better use of ADX indicators to guide our investment decisions.