Using ADX for day trading futures and forex gives a lo of trades in a week. But some ask how many trades the ADX indicator by THD generates per week (magenta peak retracements, which happens to be my favorite trades). With the new strategy that I developed and use in the Futures and Binary Trading room, it is much easier to show how many trades are generated. First, you need to understand the setup.
Using ADX for Day Trading Futures & Forex
The setup is:
- If the histogram bars in the ADX are magenta:
- Blue ADX line — offset the low and that is where the ADX magenta peak will likely come in
- Red ADX line – offset the high and that is where the ADX magenta peak will likely com in
- Once the high/low is violated then we go to the 3 minute chart:
- If the ADX line is blue, the 3 minute must show a red ATR with price retesting the ATR for resistance
- If the ADX line is red, the 3 minute must show a blue ATR with price forming support at the ATR
Once these conditions are met, if entering on the 3 minute, double the risk and that is your profit target or you move your stop up using the low (down with the high). For example, in the chart below price has violated the yellow dot (offset of high). The ADX line is red. We look to the 3 minute chart and see that the ATR is blue and price has retested with buyers coming in on the low. Our risk is 15 ticks and our profit target is 30 ticks. Done deal! (Click on images to expand.)
Now let see how many of these trades we have encountered this week. From the following charts on Gold, Crude, Dow, Nasdaq, ES, Euro, British Pound, Aussie Dollar, Yen, and Swiss Franc we have had the following trades:
Using ADX for Day Trading Futures & Forex Totals
Here are all the charts. Remember the profit target is taken on the 3 minute chart — so as long as price moved 30 ticks in the direction of the trade, profit was taken (profit is based on using a 15 ticks stop and 30 tick profit target). Since these charts show the full week of trades, you will need to expand the charts by clicking on them. A green arrow means it was profitable on the 3 minute. The red X means it was not profitable on the 3 minute chart.
Using ADX for Day Trading Futures & Forex Charts
These were only the counter-trend trades based on the ADX magenta peaks. We can also enter into the trend using the ATR for either support or resistance. Those are simpler because you just match the colors, blue to blue or red to red. Price reaches the ATR, we look for volume divergence and if it appears we enter. Still using the same Risk to Reward parameters (15 tick stop with 30 tick profit target).
And since the last trade on Crude was still in progress when I captured the screenshot, here are both charts so that you can see the setup and exit using the 3 minute.