The ADX trading strategy for futures and forex will be released early next year.  This proprietary trading strategy allows traders to capture profits when the market is in a retracement on a higher timeframe.  While the original algorithm for the ADX was written by Welles Wilder, I have modified the algorithm to identify when we can expect these profitable retracements.

ADX Trading Strategy Rules for Futures and Forex

The rules for the trading the ADX strategy entries are fairly simple.  They are:

  • ADX histogram bars must be magenta (even better when the ADX line component is over 70 as this identifies the markets as being oversold or overbought depending on color of the line).
  • There must be at least 50 ticks of potential profit back to the ATR (this is now automatically calculated by the ADX trading strategy)
  • The lower timeframe must confirm the trade entry generated by the ADX trading strategy
    • This means that the ATR must be the opposite color.  So if the ADX line is red, the ATR must be blue or vice versa.
    • Price will test the ATR on the lower timeframe and will be unable to break it.
  • On the first bar after entry, the previous bar high or low is offset as a stop.
  • After the first bar, the stop is moved to within X number of ticks from entry.

ADX Trading Strategy Futures and ForexClick on chart to expand and see the ADX trading strategy results on the ES 720 minute chart.

The higher the ADX line the better the retracement.  Plus, the ADX trading strategy allows traders to receive alerts via text messages or emails so they can evaluate the trade entry.  Of course, trading the ADX strategy on Futures and forex higher the timeframe, have the potential to increase profits but the trader still needs to verify the entry on the lower timeframe.  Trading the ADX strategy on the lower timeframe can also decrease the risks while still being able to capture the profits.