DIVERGENCE IN ADX (A thread)
ADX gradually makes lower swing highs and swing lows.
It reaches a very low level
A breakout in chart takes place which makes the indicator to move up.
A strong move usually follows.

If it happens at lower side of market, it usually signals a major reversal.

If it happens at higher end of market, it generally culminates in the form of a major top.

I had talked about the effects of divergence earlier too. The chart says it all.
As one can see in it that the entire process took months to complete itself in daily charts.

The beauty of ADX is it can be used in charts of all periodicity. Depending upon the periodicity of chart its effect varies.
Short term traders can look out for such divergence and breakout in 5, 15, 30 or even hourly charts.

A little back testing can do wonders.
#ADXPower
https://t.co/JqEEcsBSHY

More from All

You May Also Like

A THREAD ON @SarangSood

Decoded his way of analysis/logics for everyone to easily understand.

Have covered:
1. Analysis of volatility, how to foresee/signs.
2. Workbook
3. When to sell options
4. Diff category of days
5. How movement of option prices tell us what will happen

1. Keeps following volatility super closely.

Makes 7-8 different strategies to give him a sense of what's going on.

Whichever gives highest profit he trades in.


2. Theta falls when market moves.
Falls where market is headed towards not on our original position.


3. If you're an options seller then sell only when volatility is dropping, there is a high probability of you making the right trade and getting profit as a result

He believes in a market operator, if market mover sells volatility Sarang Sir joins him.


4. Theta decay vs Fall in vega

Sell when Vega is falling rather than for theta decay. You won't be trapped and higher probability of making profit.