Understanding Trading Crypto With Average Directional Index (ADX) Indicator - Part 2
Hello everyone, hope you all are doing good? I'm back with the Part 2 of this amazing series, Understanding Trading Crypto With Average Directional Index (ADX) Indicator. If you haven't read the Part 1, I strongly suggest you that by clicking here. In today's article we would be looking at how to add ADX, DI+ and DI- indicators to the chart and what it is best settings & why?
I make use of Huobi Exchange Platform when trading, as I like the set up of the charts and it has so many indicators and I'm quite used to the platform. I will show you how to add ADX, DI+ and DI- indicators to your chart on Huobi Exchange Platform.
As soon as you are on the main page of Huobi Exchange, click on Spot Trading which can be found at the headers section. When you click it, you will see a dropdown, click on Exchange. Look at the image below for more understanding.
That will lead to exchange section of the platform. Now you can see where you can be able to choose your preferred coins pairing, the chart and others. To view your chart better, click on Full Screen. Look at the image below for more understanding.
Congrats, you are now looking at your chart on Full Screen. Now you should add ADX, DI+ and DI- indicators to your chart. You will have to click Index, which can be found at the top sections of the page. Look at the image below for more understanding.
When you click on it, you can then search for ADX, DI+ and DI- indicators. They two indicators ADX indicators, there is an ADX indicator which display only ADX line while Directional Movement indicator which display ADX line, DI+ and DI- indicators, all at once. So, I will suggest you search for DM or Directional Movement, at the search bar of Indicators and then click on it.
Boom!!! You can now see your ADX, DI+ and DI- indicators on your chart.
You can modify the indicators to suit your preference and also know and choose which color you want as your ADX Line, DI+ and DI- Line, just by clicking on the indicator setting, which is known as Format on Huobi Exchange. Look at the image below for more understanding.
Here is how the Style setting for DM indicator looks like(image below). You can see color, for ADX, DI+ and DI- indicator. You can also increase the intensity of the color you view your indicators better.
I changed my colors to suit my preference and increased the color intensity, to view my indicators better. Take a look at the change.
For the input setting, you have your DI Length and ADX Smoothing at 14, default setting. What this default setting means, is that, the ADX Smoothing will take readings from the last 14 candlesticks in order to provide traders some signals.
Best ADX Indicator Setting And Why?
Different setting for different kind of traders. Scalp traders and Swing traders will definitely be using different ADX indicator setting as their type and strategy for trading are different, hence, different ADX indicator setting.
For scalp traders, they will make use of shorter period for ADX Smoothing and DI length. The advantage for this type of setting, is that, you will be able to see more signals. Although, the disadvantage of this setting, is that most of the signals will be false. Let me use 7 periods to see the effect it will have.
As you can see from the chart above, so many crosses and signals for traders.
For Swing traders, they will make use of longer period for ADX Smoothing and DI length. The advantage of this type of setting, is that, there are less false signals. Although, the disadvantage of this setting, is that, signals may come too late for traders. Let me use 25 periods to see the effect it will have.
As you can see from the chart above, there are very fewer crosses and less volatility with the indicator, hence, less false signals.
My best setting may not work for you and your best setting might not work for me, hence, different settings for different traders. You need to study which setting works best for your trading strategy and make use of it. For me, I will be using the shorter period because I'm scalp trader. I will use the Ichimoku indicator to confirm my signals before entering the market.
I hope you all found the article interesting and exciting. Do well to share your thoughts about the article in the comment section below. Thanks.
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