Average Directional Index (ADX)
The ADX is a momentum indicator that is used to see which way the price trend is going and how strong the trend is. This indicator consists of 3 different lines: the ADX, DI+ and DI-, all 3 the lines have a value between 0 and 100. The ADX line displays the strenght of the trend, a value above 25 is considered a trend and the higher the value the stronger the trend. Any value below 20 indicates no trend, the market is moving sideways. The DI+ and DI- lines are to indicate the direction of the trend, either up or down. If the DI+ line has a value that is higher than the DI- then there is a upwards trend. When the value of DI- is higher than DI+ then there is a downtrend. The higher these values get, the stronger the trend is.
So basically this indicator is used to determine the trend of the price very quickly, this can be very usefull in Gunbot. Using ADX will help you make safer trades of a higher quality, the result may also be that you will get less trades in total.
How to use ADX in Gunbot
You can use the ADX indicator in 2 ways in Gunbot, either a primairy strategy or as a confirming indicator. In this article we will only talk about the second option. A confirming indicator is an extra way to ensure better and more profitable trades, Gunbot will use a confirming indicator next to your regular strategy when placing an order. As soon as the regular strategy determines that it is a good moment to place an order, Gunbot will check this with the confirming indicator and both will have to be positive in order for the order to be placed.
If you want to use ADX as a confirming indicator, go to Settings > Strategy Configurator and select your strategy of choise there. Next, click the indicator tab where you will find a button called ADX enabled which will turn blue when you click it. You have now enabled ADX and you will notice a few parameters appearing that are related to ADX as you can see below.
You can use these parameters to adjust the indicator to your needs, we highly suggest that you use the Backtesting add-on to see what settings work best.
If you want to read more about using ADX as a primairy strategy, click here.
||false||Values: true or false.
Setting this to true will enable ADX as a confirming indicator, only allowing trades when the trend strong enough to meet or exceeds the set
||25||Values: numerical, ranging between 1 and 99.
Sets the minimum trend level that needs to be reached for orders to be allowed. This affects both buy and sell orders.When set to 25, trades will only be placed when ADX is between 25 and 100.
||14||Values: numerical, ranging between 1 and 99.
Sets the number of candles used to calculate ADX.