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2013issue C0632-37

Combining moving averages, stochastics, and ADX in a daily scan

A planned after-close daily evaluation can sort a multi-thousand-symbol list in about five to ten minutes by classifying trend with a moving-average slope, timing with stochastics, and checking the onset of a directional-line turn.

  • A planned after-close daily evaluation of a multi-thousand-symbol list can be finished in about five to ten minutes and used as the next day's decision base.
  • A 20-period average that rises for at least two consecutive closes is treated as an uptrend; failure of that two-day rise is treated as a falling trend before timing is considered.
  • Stochastic oscillators of several lengths supply forward timing after the moving-average filter is set, while a turn in the plus or minus directional line is treated as more useful than a plus-minus crossover.
  • A daily signal is checked against the weekly chart and a five-minute chart so a weak higher-timeframe trend can block the trade.
Entries in this reading3 entries
Current trackAverage Directional Index71 readingsStochastic oscillator170 readingsMoving average449 readings

The after-close daily evaluation

A daily evaluation is a planned after-close sort of a large symbol list that reduces chart-by-chart review to a short candidate set for the next session. A planned after-close scan of a multi-thousand-symbol database can be finished in about five to ten minutes and used as the next day's decision base.

The evaluation first classifies the broader market and each name as trending up or down, then chooses indicators and a timeframe that match that trend.

Classify the trend first

A moving average is a smoothed average of recent closes used here as a two-day slope filter that classifies a name as rising or falling before any entry or exit is considered.

A 20-period average that rises for at least two consecutive closes is treated as an uptrend. Failure of that two-day rise is treated as a falling trend.

Averages shorter than 20 periods are taken as simple means and longer ones as exponential means so nearer closes receive more weight. In high volatility the 20-period simple average can be shortened to 16 so the trend filter reacts faster.

QLD daily close with 16- and 30-period moving averages

A trader running the after-close scan would treat this stretch as an established uptrend: after the late-December washout near 53.50, ProShares Ultra QQQ gaps into the mid-58s and then holds above a rising 16-period exponential average and a 30-period average into February. Readings were taken from the published daily TC2000 pane; 58.08 is the printed last close on 22 February 2013.
A trader running the after-close scan would treat this stretch as an established uptrend: after the late-December washout near 53.50, ProShares Ultra QQQ gaps into the mid-58s and then holds above a rising 16-period exponential average and a 30-period average into February. Readings were taken from the published daily TC2000 pane; 58.08 is the printed last close on 22 February 2013.ProShares Ultra QQQ (QLD) · Daily · 2012-11-26T00:00:00.000Z to 2013-02-22T00:00:00.000Z

The source pane also plotted parabolic SAR at 0.02/0.20 and a 10-20-7 MACD histogram on lower panes; those series were not digitized. Turning-point dates between the weekly grid labels are approximate to a session or two, and prices other than the printed last close are readable to about 0.2 dollars.

Add a stochastic timing layer

A stochastic oscillator is a bounded oscillator that locates price inside its recent high-low range so a scan can flag overbought, oversold, or crossover timing after the trend filter is set. Stochastic oscillators of several lengths supply the forward timing layer after moving averages have defined the trend.

Combining the slope of a short moving average on a MACD histogram with a stochastic condition produces a stronger sort or scan than either tool alone.

Read directional lines for the onset of a turn

The average directional index is a directional-strength overlay whose plus and minus lines mark the start of a trend shift earlier than a simple line cross. The onset of a turn in the plus or minus directional line is treated as more useful than a plus-minus crossover when ADX-style directional lines are added to the chart.

Check one timeframe above and one below

A multi-timeframe check means reading one chart above and one below the signal timeframe so a daily trigger is not taken against a weak weekly backdrop. A daily trading signal is checked against the weekly chart and a five-minute chart so a weak higher-timeframe trend can block the trade.

After a dominant price trend is in place, entries and exits are timed mainly with moving averages, stochastics of different lengths, and a smaller set of supporting indicators.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
48 of 56 in the Average Directional Index track
201534-40 pp.Next on Average Directional IndexAssembling the Average Directional Index from directional movementDirectional movement is split into plus and minus components by comparing the high-to-high change with the low-to-low change and keeping only the larger move when that move is positive.
All readings on this track · 56 readings
  1. 1986Cycle-aligned directional trend indicator
  2. 1987What crossover and directional entry rules actually compare
  3. 1988A directional-line cross needs a trend filter, an extreme-point rule, and a dollar stop
  4. 1988Constructing true range by offset addressing
  5. 1988Constructing directional movement from bar range
  6. 1988Average directional index construction: recursive smoothing and lookback offset
  7. 1988Staged Average Directional Index construction with Relative Strength Index confirmation and stop alerts
  8. 1988Average Directional Index construction with frozen true range and directional rules
  9. 1991Constructing the average directional index from range expansion and true range
  10. 1991Constructing five-session forecasts from stochastic, ADX, and MACD inputs
  11. 1993Constructing the average directional index from directional movement and true range
  12. 1993Confirming n-bar breakouts with ADX and DX filters
  13. 1994Constructing a Bollinger band-width trend filter
  14. 1994A pre-trade checklist that can refuse a long three ways
  15. 1997An ADX threshold and a moving average as a trend filter
  16. 1998Regime filters for mutated indicators
  17. 1999Building the average directional index from range extension and true range
  18. 2000Evaluating ADX, RSI, and moving averages in a multi-stock warehouse
  19. 2000Stochastic pop as a filtered continuation setup
  20. 2000Onset and exit from one average directional index
  21. 2002Joint ADX and MACD readout for trend strength and direction
  22. 2003Adaptive Donchian breakout with implied volatility and volume
  23. 2004The average directional index as a regime gate for the relative strength index and the stochastic oscillator
  24. 2004Constructing true-range-specified volume as a directional filter
  25. 2005Constructing a multi-filter penny stock breakout procedure
  26. 2005Construct one playbook that flips with session regime
  27. 2005Combining Bollinger Bands, the average directional index, and Fibonacci retracement on currency pairs
  28. 2006Assembling an adaptive price zone from double-smoothed averages
  29. 2006An ADX strength gate for MACD and the stochastic oscillator
  30. 2007Directional movement as a filter plus trigger
  31. 2007Constructing a veto-first trend permission stack
  32. 2007ADX gates for trend end, range, and reversal
  33. 2008Constructing a nine-cell directional-ratio grid
  34. 2008Average directional index and directional trend indicator lookbacks as trend-filter parameters
  35. 2008A holding-matched market lens from averages and directional-line crosses
  36. 2008A nine-cell directional scoreboard for multi-horizon entries
  37. 2010Building a Vortex Indicator from high-low distances
  38. 2010Constructing ADX, RSI, and MACD price filters
  39. 2011Constructing a volume zone oscillator with a moving-average and Average Directional Index regime filter
  40. 2011A volume zone oscillator conditioned by an Average Directional Index filter
  41. 2011Candlestick names need volume-price, ADX, and moving-average checks
  42. 2012Clustered average-directional-index traces as a trend-start filter
  43. 2012Average Directional Index cluster filters for trend-start signals
  44. 2012Confirming a trend start or turn with a triple ADX cluster
  45. 2013Constructing a late-entry stack from a signed DMI oscillator
  46. 2013A directional oscillator and its stochastic as a stacked timing filter
  47. 2013ADX cluster lookbacks are a locked specification, not a chart label
  48. 2013Combining moving averages, stochastics, and ADX in a daily scan
  49. 2015Assembling the Average Directional Index from directional movement
  50. 2016How an Average Directional Index filter and a breakout entry form one procedure
  51. 2016Score RSI and stochastic crossings only when ADX confirms the trend
  52. 2018Constructing an ADX filter for intraday breakouts
  53. 2018An ADX volatility gate for prior-day breakouts
  54. 2019Exponential deviation bands with a moving average, RSI and ADX
  55. 2020A normalized-slope trend filter from linear regression
  56. 2020Gating volatility-momentum divergences with a Trend filter
By fieldIndicators and filters682 readingsBy year201398 readings
All 71 readings tagged Average Directional Index
Also on Average Directional Index5 readings
1991Constructing five-session forecasts from stochastic, ADX, and MACD inputs1994Building average directional index, the stochastic pair, and Williams percent R from highs, lows, and closes1994Label the tape before you read stochastic or Williams %R2000Stochastic pop as a filtered continuation setup2004The average directional index as a regime gate for the relative strength index and the stochastic oscillator