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2012issue C1113-21

Confirming a trend start or turn with a triple ADX cluster

Classic directional movement index rules treat a 14-period ADX above 20 and rising as a trend, with +DI and -DI supplying direction. A modified construction replaces those three lines with three-, four-, and five-period clusters so a start or turn is read from the group rather than from one 14-period reading.

  • A 14-period ADX above 20 and rising is treated as a trending market, while +DI and -DI supply the up or down direction.
  • The modified construction replaces the three DMI lines with clusters of three ADX, three +DI, and three -DI lines built on three-, four-, and five-period lookbacks.
  • The triple ADX cluster is used to time the start of a strong trending move before it begins and to mark the end of a trending move.
  • Combined with the ADX cluster, the triple +DI cluster is used to time bottoms and the triple -DI cluster is used to time tops.
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Current trackAverage Directional Index71 readings

What a single DMI reading confirms

The directional movement index is the three-line set of ADX, +DI, and -DI used to detect whether a market is trending and in which direction. The average directional index is a trend-strength line that does not itself say whether price is moving up or down. Plus DI is the up-direction line used with ADX to identify upward trend conditions. Minus DI is the down-direction line used with ADX to identify downward trend conditions.

Classic ADX is treated as signaling a trending market when the 14-period line is above 20 and rising, while +DI and -DI supply the up or down direction. An uptrend reading is defined as ADX rising above 20 with +DI above ADX and rising. A downtrend reading is defined as ADX rising above 20 with -DI above ADX and rising.

After ADX has risen to about 50 and turns down, the decline is treated as a retracement: a prior uptrend implies a downward correction, and a prior downtrend implies an upward correction. When ADX falls back below 20, the market is treated as nontrending until the line rises above 20 again. In a strong trend the two DI lines move in opposite directions and open distance. In congestion they stay close and tend to cross.

How the triple clusters are built

The modified construction replaces the original three DMI lines with three separate clusters of three ADX lines, three +DI lines, and three -DI lines. The three ADX lines are built on three-, four-, and five-period lookbacks so the cluster is more sensitive than a single 14-period ADX.

The triple ADX cluster is three short-period ADX lines plotted together to time the start and end of a strong move. Combined with that cluster, the triple +DI cluster is three short-period +DI lines used to time bottoms, and the triple -DI cluster is three short-period -DI lines used to time tops.

Timing a start, end, or turn

The triple ADX cluster is used to time the start of a strong trending move before it begins and to mark the end of a trending move. Combined with the ADX cluster, the triple +DI cluster is used to time an intermediate or major bottom, and the triple -DI cluster is used to time an intermediate or major top.

A 3x ADX cluster peak above 70 is shown as the end-of-move signal on EUR/USD. Pairing DI clusters with ADX clusters is presented as a way to distinguish a single-pointed turn from a looser turn.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
44 of 56 in the Average Directional Index track
201330-37 pp.Next on Average Directional IndexConstructing a late-entry stack from a signed DMI oscillatorThe Average Directional Index reports strength of movement, while the plus and minus directional indicators supply signed direction over a lookback.
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  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
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  17. 1999Building the average directional index from range extension and true range
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  19. 2000Stochastic pop as a filtered continuation setup
  20. 2000Onset and exit from one average directional index
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  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
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  36. 2008A nine-cell directional scoreboard for multi-horizon entries
  37. 2010Building a Vortex Indicator from high-low distances
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  39. 2011Constructing a volume zone oscillator with a moving-average and Average Directional Index regime filter
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  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
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